SHITAL FIBRES LTD. Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) THIS appeal has been filed by the appellants against the impugned order -in -original dated 16 -6 -2000 as amended by corrigendum dated 7 -7 -2000 (issued on 10 -7 -2000) passed by the Commissioner of Central Excise vide which he had dropped demand of Rs. 43,43,585/ - but confirmed duty demand of Rs. 5,99,336/ - and imposed penalty of Rs. 1,00,000/ - along with interest at the rate of 20% under Section 11AB of the Central Excise Act, 1944, on them.

(2.) THE appellants are engaged in the manufacture of acrylic knitted blankets falling under Chapter 63 of the CETA. During the visit to their factory premises on 13 -3 -1999 the Central Excise Officers observed that during the process of manufacture of the blankets an intermediate product, namely -knitted fabrics (processed) emerged at the intermediate stage which was classifiable under Tariff Heading 6001.92 of the CETA; and leviable to basic excise duty at the rate of 12% and additional excise duty at the rate of 8% under Additional Duties of Excise (Goods of Special Importance) Act, 1957. The knitted fabric (processed) could not be, therefore, removed in terms of explanation under Rules 9 and 49 of the Central Excise Rules for captive consumption for the manufacture of the final product, namely knitted blankets in the factory premises without paying the appropriate excise duty. But the appellants neither disclosed/declared about the said intermediate goods in the classification lists, as required under Rule 173B of the Rules nor entered the same in the statutory record. No doubt, in terms of Notification No. , dated 16 -3 -1995 the said intermediate goods were exempt from basic excise duty leviable under the Central Excise Tariff Act subject to the other conditions specified therein but there was no exemption from payment of additional excise duty leviable under the Additional Duties of Excise (Goods of Special Importance) Act, 1957. The appellants were, therefore, required to supply the value of knitted fabrics (processed) consumed captively for the manufacture of the final product during the period 1 -7 -1998 to 31 -3 -1999 and after getting the details from them, they were called upon through show cause notice dated 1 -4 -1998 for payment of the additional excise duty amounting to Rs. 49,42,921/ - and penalty was also proposed to be imposed on them.

(3.) THE appellants contested the correctness of the said show cause notice. They denied the emergence of any intermediate product known as knitted fabric (processed) during the course of manufacture of final product knitted acrylic blankets and also furnished the details of the process of manufacture carried out by them. According to them, they fed two series of Polyester filament yarns [(1358 yarns for the face and 1358 yarns for the back on four Section beams each for face and back (warp) and pile yarn 2/32S spun yarn] on a creel in double raschel machine and thereby prepared unfinished twin blankets in continuous length of 80 meters with a width of 2.4 meters and thickness of 22 mm. and the said unfinished twin blankets were then split into a single blanket on a cutting machine, the thickness of unfinished blanket was about 11 mm. The continuous length of 80 metres of unfinished blankets were then screen printed on a screen printing machine with facilities of curing, washing and soaping. The continuous length of blanket was thereafter taken to a dryer for drawing purposes. The dried blankets were then subjected to the process of brushing and raising in order to give a soft underside. Thereafter the blankets were sheard and polished on a sucker -muller, a German Machine to remove uneven pile yarn from the surface and to give the blankets finished appearance. From the finished blankets in continuous length of 80 metres each blanket of 2.4 metres in length was manually cut, hemmed and packed for marketing. The appellants denied their liability to pay the additional duty on the knitted fabric (processed) as according to them no such fabric emerged at the intermediate stage and that even otherwise the so -called knitted fabric, could not be termed even as 'goods' under the Central Excise Act and had no marketability whatsoever.