SRF LTD. Vs. CCE

JUDGEMENT

(1.) THIS appeal is preferred by M/s SRF Ltd, the appellants herein against the order in Original No. 06/99 dated 30.11.1999 passed by the Commissioner of Central Excise, Chennai by which he has confirmed a duty demand of Rs. 1,01,73,524/ -under Rule 9(2) of the CE Rules, 1944 read with Section 11A of the CE Act, 1944 and Section 3(3) of the AED (GSI) Act, 1957 being the AED payable on the unprocessed tyre cord fabric which were cleared during the period from June 1998 to December 1998. The Commissioner has also imposed a penalty of Rs. 5,00,000/ - on the appellants.

(2.) BRIEF facts of the case are the appellants are engaged in the manufacture of Nylon Chips, Nylon Filament Yarn and Nylon Tyre Cord fabrics (both unprocessed and processed) falling under chapter 39, 54 and 59 of the schedule to the CET, 1985. They also availed themselves of the credit of specified duty paid on the inputs used in the manufacture of their final product under Rule 57A of the CE Rules, 1944 read with Notification No. 24/94 -CE(NT) dated 20.5.1994 as amended on capital goods used in the manufacture of final products under Rule 57Q of the CE Rules 1944. The term specified duty includes Additional Excise Duty (AED) payable under Section 3 of Additional Duties of Excise (Goods of Special Importance) Act, 1957. They also manufacture unprocessed Tyre Cord Fabrics (UTF) and captively consume the same in the manufacture of Processed Tyre Cord Fabrics (PTF). They also clear the UTF as such for home consumption on payment of duty. They also procure UTF from the market for the manufacture of PTF. The UTF consumed in the manufacture of PTF is exempted from whole of duty payable under Section 3 of the CE Act, 1944 vide Notification No. 67/95 -CE dated 16.3.1995 as amended. However, they pay AED payable on UTF since no exemption from AED is available for captive use. The AED paid on unprocessed fabric is taken as credit under Rule 57A of the CE Rules read with Notification No. 24/94 -CE(NT) dated 20.5.1994 as amended. However, PTF' manufactured out of the UTF is exempted from AED vide Sl. No. 27A of Notification No. 9/96 -CE dated 23.7.1996.

(3.) ON verification of the accounts of the appellants it was noticed that they have wrongly availed credit of AED paid on UTF consumed captively, and purchased from market for payment of AED on UTF cleared for home consumption. Proceedings were therefore initiated against the appellants by issue of show cause notice demanding duty of Rs. 1,01,73,524 and for imposition of penalty under Rule 173Q of CE Rules, 1944. After considering the reply furnished by the appellants and after hearing their Advocate accompanied by their representatives, the impugned order came to be passed demanding duty and imposing penalty as noted above. It is against this order of the Commissioner, the appellants have come in appeal before us on the following grounds: