STANDARD INDUSTRIES Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THIS appeal has been filed by the appellants against the order -in -original, dated 8 -10 -1991 passed by the Collector of Central Excise vide which the duty demand had been raised and penalty had also been imposed on them under Rule 173F, 173G(1), Rules 45,47,51 and 52 read with Rules 52A, 53 and 226 of the Central Excise Rules.

(2.) FACTS giving rise to this appeal are briefly stated as under :

(3.) THE appellants are engaged in the manufacture of cotton/yarn and cotton fabrics covered by T.I. ISA and 191 of the Central Excise Tariff 1944 (sic) up to 28 -2 -1986 and thereafter under Chapters 54 and 55 of the Central Excise Tariff Act, 1985 and also of man -made fabric and yarn covered by T.I. 221, 181 -11 and 18E of the Central Excise Tariff 1944 upto 28 -2 -1986 and thereafter under Chapters 54 and 55 of the Central Excise Tariff Act, 1985. They are holders of the Central Excise licence, L -4 CF/21/49 CY -1/61 and ASF -48/63. On 16 -6 -1987 the appellants filed for the first time, classification list bearing No. 1, dated 16 -6 -1987 in respect of coated and laminated with Low Density Polyethylene Cotton Fabrics covered by Chapter Heading 5903.11 of the Central Excise Tariff Act, 1985. They have got approved bonded store rooms G -7 and G -9 located in the licensed premises, as required under the provisions of Rule 47 of the Central Excise Rules. M/s. Mafatlal Apparel Mfg. Co. Ltd. wholly owned subsidiary of the appellants, are engaged in the manufacture of garments and in the year 1981 they imported ICL machine for the manufacture of coated interlining fabric and installed the same in the mill of the appellants. The appellants started manufacturing the coated fusible interlining fabrics on that machine out of grey fabrics received from M/s. Mafatlal Apparel Mfg. Co. Ltd. and thereafter supplied the entire quantity so manufactured to them (M/s. Mafatlal Apparels). The appellants in order to evade the Central Excise duty wrongly classified the cotton fabric coated and laminated with High Density polyethylene under T.I. 191(b) instead of T.I. 191 -11 during the period September 1981 to February 1986 and thereafter from 28 -2 -1986 to 17 -6 -1987 under Chapter Heading 52.06 of the new Tariff, instead of properly classifying under sub -heading 5903.19. They also after 17 -6 -1987 wrongly classified the product under sub -heading 5903.11 and Heading 52.06 as against proper classification Chapter sub -heading 5903.19. The officers of the Bombay Division G -II visited the premises of some of the customers of the appellants and made enquiries. They recorded statement of Mukesh Chawala who was a partner in the standard agencies and quality traders, the customers of the appellants on 7 -3 -1988. The samples of the fusible interlining fabrics purchased from M/s. Mafatlal Apparel Mfg. Co. Ltd. were also drawn by the officers on 8 -3 -1983 and documents were also seized. The statements of Shri B.R. Desai, Deputy Sales Manager of M/s. Mafatlal Apparel Mfg. Co. Ltd. was recorded. The preliminary investigations by way of scrutiny of all the records showed that M/s. Mafatlal Apparel Mfg. Co. Ltd. did procure ICL machine in the year 1981 and installed the same in the premises of the appellants' factory who manufactured fusible interlining fabric on that machine and cleared the same by misclassifying only as cotton fabrics instead of as coated fabric. The Central Excise Officers also visited the Head Office of the appellants and of M/s. Mafatlal Apparel Mfg. Co. Ltd. on 23 -3 -1988 and withdrew the records and documents of the last five years under statements of Shri B.D. Datar, Secretary of the appellants' Mill and V.H. Kapadia, Chief Accountant of M/s. Mafatlal Apparels Mfg. Co. Ltd. During the course of enquiries, the appellants came forward with a letter 23 -3 -1988 and gave cheque for Rs. 30 lakhs drawn on the Central Bank of India on account of the duty leviable, if any, on the sale of the fabrics made by them to M/s. Mafatlal Apparels Mfg. Co. Ltd. They also did not dispute that the fabric did not satisfy the definition as given in the erstwhile Tariff T.I. 191 -11 and in Chapter 59.03 of the new Tariff w.e.f. 1 -3 -1986. They only alleged that by mistake the fabric was not classified under sub -heading 5903.19 and offered to pay the differential duty without prejudice to their right in this case.