SANKARA FABS PROCESSORS P. LTD. Vs. CCE

JUDGEMENT

(1.) IN these cases, a demand of Rs. 69,73,207/ - has been confirmed against appellant No. 1 on the ground that they clandestinely cleared processed fabrics chargeable to duty at different rates during the period 1993 to 1997, in the guise of processed hosiery which is exempt from duty. A penalty of amount equal to duty has been imposed under Section 11AC of the Central Excise Act read with Rule 173Q and 226 of the Rules, a penalty of Rs. 10 lakhs has been imposed on Shri Sanjay Arora, Director of appellant No. 1 in terms of Rule 209A of the Rules. The Commissioner has also held that appellant No. 1 is liable to pay interest in terms of Section 11AB of the Act. The appellants, who are represented by their Counsel, Shri L.P. Asthana do not dispute the finding; however, they challenge the computation of duty liability as well as the levy of interest and imposition of penalty for the period prior to 28.9.1996, which is the date on which Section 11AB and Section 11AC were introduced in the Act. In the reply to the show cause notice, they challenged computation of duty liability on the grounds that (a) the width of the fabric had been wrongly taken to be 110 cm. whereas the fabric processed by the appellants was 163 cm width (b) they also contested the value of the grey fabrics adopted in the show cause notice, viz. Rs. 40 per square metre, since the value was in the range of Rs. 18/ - to Rs. 21/ - per square metre (c) they also contested the method of calculation of assessable value which was relevant, as the duty varied depending upon the value. They submit that they had challenged the valuation and substantiated their defence, by filing copies of letters from customers with whom approximately 90% of the processing business was transacted, confirming that the width of grey cloth supplied by them for processing was 163 cms., etc. They also filed a miscellaneous application for additional evidence in the form of copies of invoices of the mills manufacturing cotton grey cloth which showed that the grey cloth was normally sold at Rs. 18/ - to Rs. 21/ - per square metre, purchase bills of M/s. Fredbi Fashions and M/s. Foray International, who supplied grey fabrics at a price of Rs. 18/ - to Rs. 22/ - per square metre to the appellants, during the period September, 1997 to 1999 and they submit that the same type of fabrics at the same price had been supplied to them by these customers during the period in dispute also. They have also filed copies of invoices and price lists showing that during the relevant period, the value of grey fabrics used in processed fabrics cleared on payment of duty, was also in the range of Rs. 18/ - to Rs. 23/ - per square metre, which they submit, supports their stand in the calculation of assessable value of grey fabrics. They also submit that the method of calculation of rate of duty on processed fabrics has not been correctly followed in the impugned order under which processing charges have not been added to the grey fabrics, prior to dividing the same by the width of fabrics, as a result of which processing charges have not been correctly worked out on a per square metre basis and in support of this contention, they filed their own price lists as well as price lists of other processors which showed the method of calculation of the rate of duty per square metre. In the light of the above, they pray that the additional documents may be taken on record and the case may be remanded for fresh decision on the valuation and consequent duty liability. They also seek remand for the reason that interest and penalty have been levied and imposed even for the period prior to introduction of the Statutory provisions for such levy and imposition.

(2.) LEARNED DR reiterates the findings of the adjudicating authority.

(3.) IN the result, the impugned order is set aside and the appeals allowed by remand in the above terms.