M/S PUNJAB FIBRES LTD. Vs. CCE, CHANDIGARH

JUDGEMENT

(1.) IN this appeal filed by M/s. Punjab Fibres Ltd. (hereinafter referred to as 'PFL'), the matter relates to the applicability of exemption notification Nos.(i) 28/95 CE dated 16.3.95, (iiCE dated 23.7.96, (iii) 4/97 CE dated 1.3.97 and (iv) 5/98 CE dated 2.6.98 (hereinafter referred to collectively as the 'aforesaid notifications'), when the Cabled Elastomeric Lycra Core Spun Yarn (hereinafter referred to as the 'cabled yarn') was manufactured from the duty paid mono filament lycra yarn (hereinafter referred to as 'lycra yarn'), alongwith the cotton yarn manufactured by the appellants in their own factory and captively used in the manufactured of the said cabled yarn. Under the aforesaid notification, nil rate of central excise duty was provided on all the goods of Heading NO. 56.07 of the Central Excise Tariff, which were made from yarn, mono filament, tapes or strips, on which the appropriate duty of excise leviable under the Central Excise Tariff or as the case may be, the additional duty of customs leviable under Section -3 of the Customs Tariff Act, 1975, had already been paid. it was alleged in the show cause notice dated 3.11.98 issued by the Dy. Commissioner of Central Excise, Chandigarh -II, that M/s. PFL wilfully mis -stated and suppressed the facts during the period April, 1998 to July, 1998 in as much as, the cotton yarn manufactured and captively used was not duty paid although it was declared that their final product cabled yarn was manufactured out of the duty paid yarn. In the second show cause notice dated 12.11.99, issued by the Commissioner of Central Excise, Chandigarh -II, similar allegations were made for the period June' 1995 to March, 1998. It was alleged that the cotton yarn was manufactured by M/s. P.F.L. themselves of cabled yarn, without having paid the central excise duty leviable on such cotton yarn. As no central excise duty had been paid on the cotton yarn, it was alleged that the benefit of the aforesaid notification had been availed of through mis -statement/suppression of facts. In reply to the show cause notices, M/s. PFL leaded that the cabled yarn was manufactured by them with lycra yarn as the core and the cotton roving (sliver on bobbins) used by way of drafting. As sliver was not dutiable and no modvat credit under Rule 57 A of the Central Excise Rules, 1944 (hereinafter referred to as the 'rules') had been availed of in respect of the additional duty paid on the imported lycra yarn, they have correctly availed of the benefit of the aforesaid notifications. It was also pleaded that the benefit of the aforesaid notification could not be denied even if the central excise duty was to be charged on the cotton yarn manufactured by the and at the most, central excise duty as leviable could be collected with regard to the said cotton yarn, and the benefit of the aforesaid notifications extended. They submitted that in case duty was found leviable from the cotton roving (sliver on bobbins) treating them as cotton yarn then duty could be recovered on such cotton yarn and benefit of the aforesaid notifications extended. Even otherwise the modvat credit was available with regard to the cotton yarn, and the lycra yarn used in the manufacture of cabled yarn and there could be no ground for M/s. PFL to suppress any facts. The show cause notices wee also assailed on the ground of limitation with the plea that there was no suppression of any fact by the appellant. The Commissioner of Central Excise, Chandigarh, who adjudicated the matter denied the benefit of aforesaid notification and confirmed the demand of duty of Rs. 21,53,094/ - and imposed an equal amount of penalty. Interest under Section 11 AB of the Central Excise Act, 1944 (hereinafter referred to as the 'Act') was demanded. The benefit of modvat credit was however extended. The demand of Rs. 3,22,964/ - on account of additional excise duty was dropped. The matter was heard on 7.9.2001 when Shri K.K. Anand, Advocate submitted that as per the classification lists/declarations field by the appellants under Rule 173B of the Rules, they have declared the consumption of lycra yarn and the cotton yarn for the manufacture of their cabled yarn. They have correctly described their product and their declarations had been duly approved by the jurisdictional central excise officers. The process of manufacture adopted by the appellants was known to the Department. As the appellants were otherwise eligible for the benefit of modvat credit, there could be no ground for them to suppress any fact. According to the appellants, the material used by them was not a marketable cotton yarn and they were under the bonafide belief that no duty was leviable on such intermediate non -marketable product. The material was used captively and was consumed in the manufacture of their finished cabled yarn, which had been properly described in the various classification lists/declarations. According to the ld. Advocate there was no justification for involving the extended period of limitation as all the facts were within the knowledge of the Department. The ld. Advocate argued that if their product captively consumed is treated as a dutiable cotton yarn then the appellants be charged to appropriate central excise duty on the cotton yarn and the benefit of aforesaid notification be extended. It was argued that there could be no justification for imposition of any penalty or demanding any interest. The ld. Advocate relied upon the Tribunal's decision int he case of Shivalik Agro Poly Products Ltd. Vs. Commissioner of Central Excise, Chandigarh - : 1994 (74) ELT 631 (Tribunal), wherein the Tribunal had observed that any issue considered necessary to arrive at a correct and complete decision could be raised before the Tribunal.

(2.) In reply, Shri Rajeev Tandon, SDR submitted that the benefit of aforesaid notifications was subject to the conditions that the yarn, mono filament, tapes, or strips used in the manufactured of finished products were duty paid. In as much as the cotton yarn used was not duty paid, a correct view has been taken by the adjudicating authority. The penalty have also been correctly imposed. The ld. SDR submitted that the option to pay duty on cotton yarn could not be extended at this stage, and that the decision relied upon by the ld. Advocate, was not applicable to the facts and circumstances of this case.

(3.) WE have carefully considered the matter.