COMMISSIONER OF CENTRAL EXCISE Vs. G H SINGHVI

JUDGEMENT

(1.) THE brief facts of the case are that M/s. Konkan Synthetics Fibres (proprietor Century Enka Ltd. hereinafter referred to as M/s. CEL), C -61, MIDC, Mahad (hereinafter referred to as M/s. KSF) held a Central Excise Registration for manufacture of partially oriented yarn (POY) and different types of processed yarn (POY) falling under CH. 54.02 and 55.05 of CETA, 1985 respectively, in a single composite plant. THEy were availing Modvat/Cenvat credit and paying Central Excise duty on ad -valorem basis. THEy submitted an application dtd. 16.3,2000 and requested for bifurcation of the existing manufacturing site at Plot No. C -61MIDC, Mahad into two parts. According to them, such bifurcation was necessitated to implement product group management concept and to give greater flexibility and more freedom in decision making, manufacturing as well as marketing of the products. THEy also requested for separate Central Excise Registration of these two premises to be carved out of the original site. Relying on the reasons and information provided by M/s. KSF, the alteration in the manufacturing site was allowed and two parts were created by erecting a boundary wall and after making other changes in the ground plan. THEse physically separated sites were given separate Central Excise registration with effect from 26.4.2000. THE existing registration was amended and it was endorsed in the name of M/s. KSF (processed yarn unit). THE premises carved out of the old unit having facilities for manufacture of POY was given separate registration Number. After investigation, it was revealed that M/s. KSF. CEL) had misled the Central Excise Department by misstating the facts in order to separate the existing manufacturing premises into two premises in order to claim benefit of Notfn. No. 6/2000 dtd. 1.3.2000 which was not admissible to erstwhile unit of M/s. KSF, which was composite unit having facilities for manufacture of POY and processed yarn. It appeared that the assessees had wilfully mis -stated the facts with an intention to evade Central Excise duty and contravened the provisions of Rule 174 of the Central Excise Rules and other provisions of the Rule and also rendered themselves liable for penal action under Rule 173Q of ibid. Accordingly show cause notice was issued to M/s. KSF vide office F. No. V(17)54CL -51/KSF/00/Mhd/1494 dtd. 12.4.2001. asking M/s. KSF and others to show cause to the Deputy Commissioner, Central Excise, Mahad Dn. as to why

(2.) We have heard both sides. The letter dated 16.3.2000 under which application for separate registration was made, reads as under:

(3.) D anD applieD for separate Excise Registration for KSF (POY). The Central Excise authorities sought certain information incluDing Details of proDuction of POY anD PFY for the years 1998 -1999 anD 1999 -2000 which was proviDeD by the responDents. On 11.4.2000, the jurisDictional Range SupDt. informeD the responDents that a separate compounD wall, grounD plan, in -out gate, BSR etc. must be maDe, as he haD been DirecteD to issue a new Registration certificate to KSF (POY). They initially erecteD barbeD fencing with a temporary gate anD later put up new construction in the form of compounD wall, sorting/packing builDing, security office, separate in -out gate etc. Changes were also maDe in existing structures anD builDing in both KSF (POY) unit as well as KSF(PYU; unit. Once these separate licences were granteD, the responDents also maDe other changes such as (1) Transfer of KSF (POY) managerial, aDministrative, financial anD overall control from the ProDuct Group - -Textile Yarns to the ProDuct Group HeaD - -POY. (2) Bifurcation of quality control Department (3) Transfer of all employees concerneD with POY proDuction, maintenance, stores, purchase, finance etc. to KSF(POY), (4) Segregation of accounting functions of both units, (5) separation of tax DeDuction system incluDing Deposit of TDS anD TDS returns, (6) Segregation of separate stores Department, (7) setting up of separate purchase Department for POY unit, (8) Separate material movement with separate in -out gate. The responDents also obtaineD permissions from the Labour Union for separation of KSF into two units, each unit charging the other for services proviDeD viz. water, electricity, refrigeration, information technology etc. unDer a MemoranDum of UnDerstanDing between the two units on 2.5.2000 anD Debit notes were regularly issueD. The responDents also applieD to various Government Authorities for licences anD permissions such as separate factory licences, separate electricity meters anD separate water meters which were all granteD. Approximately, Rs. 27 lakhs was spent by the responDents on putting up new construction incluDing compounD wall.