Lon Vs. Collector of Central Excise & Customs  Insc 171 (13 March 2003)
Variava & Ar. Lakshmanan Ar. Lakshmanan, J.
appellant-firm filed these appeals challenging, inter alia, the judgment and
order dated 25.2.2000 passed by the Customs, Excise and Gold (Control)
Appellate Tribunal, New
Miscellaneous Order No. M/12/2000-D in E/ROM/125/99-D in Application No.
E/2618/90-D and final order No. 487/98-D dated 15.6.1998 in Appeal No.
E/2618/1990-D, whereby the Tribunal has held that `Taspa' yarn manufactured by
the appellant was covered under Heading No. 56.06 of the Central Excise Tariff
and, therefore, confirmed the demand of duty of central excise of
Rs.5,63,066.40 and penalty of Rs.50,000/-. The facts of the case in brief are as
follows:- The appellant-firm was issued a licence under the Central Excise Act,
1944 for carrying out the processing work of yarn. According to the appellant,
since 22.5.1986, the doubled and/or multifolded yarns falling under Chapter 54
or Chapter 55 of the Schedule to the Central Excise Tariff Act, 1985 were
wholly exempted from the duty of excise leviable thereon, provided such doubled
or multifolded yarns were manufactured out of yarn falling under Chapter 54 or
Chapter 55 of the said Schedule on which appropriate duty of excise had already
been paid. Relying upon the aforesaid notifications, the appellant did not pay
any duty of excise on the same and neither did it recover such duty of excise
from its customers. The Collector of Central Excise issued a show cause notice
dated 15.7.1988 to the appellant-firm calling upon the appellant to show cause
as to why duty of excise amounting to Rs.5,63,066.40 be not recovered on the
goods, i.e., 'Taspa' yarn/fancy yarn falling under erstwhile tariff item no. 62
with effect from 1.3.1986 and under Chapter/tariff sub-heading 56.06 and
penalty be not imposed on them under Rule 173-Q of the Central Excise Rules,
1944. A reply was sent to the show cause notice that the appellant
categorically averred that it bona fidely believed that the doubled filament
yarn was exempted from payment of duty of Central Excise and there was no
intentional contravention of Rule 173 of the Central Excise Rules, 1944.
appellant-firm further stated that it was engaged in the business of processing
yarns such as crimping, texturising, doubling multifolding etc. and that the
firm had carried out doubling of yarn on a simple crimping machine and that the
simple process of doubling of yarn on crimping machine was covered under
Notification M.F. (C.D.R) I. No. 114/18/86 CX 3 dated 18.4.1986.
Collector of Central Excise, Vadodara passed an order on 29.3.1990 confirming
the demand of duty of Central Excise amounting to Rs.5,63,066.40 for the period
from February, 1986 to September
30,1987 and also
imposed a penalty of Rs. 2 lakhs on the appellant.
aggrieved, the appellant filed an appeal before the Central Excise and Gold
(Control) Appellate Tribunal, New Delhi. The
Tribunal vide its judgment and order dated 15.6.1998 rejected the appeal of the
appellant. The Tribunal while rejecting the appeal relied upon its earlier
judgment and order in the case of Dhamwala Silk Mills Surat Pvt. Ltd. vs.
Commissioner of Central Excise, Vadodara, (1997) 73 ECR 383. Since the impugned
judgment of the Tribunal suffered from error apparent on the face of the
record, the appellant filed a Miscellaneous Application for rectification of
mistake, being Application No. E/ROM/125/99-D and pointed out that the facts of
the appellant were closely comparable to the facts of Pratik Crimpers vs.
Collector of Central Excise, Mumbai, 1998(101) E.L.T. 437, the latter judgment
of the Tribunal particularly, with regard to yarns being run parallel, the
manufacturing process being common and the machineries being the same.
Tribunal rejected the application for rectification of mistake vide judgment
and order dated 25.2.2000 and held that 'Taspa' yarn manufactured by the
appellant was covered under Heading No. 56.06 of the Central Excise Tariff and,
therefore, confirmed the demand of duty of central excise of Rs. 5,63,066.40
and penalty of Rs. 50,000/-.
present appeal was filed by the appellant in this Court on the basis that the
Full Bench of the Tribunal has, by its final order dated 22.05.2000, upheld the
view taken by it in the case of Pratik Crimpers (supra), which facts and
decision are same to the facts of the case of the appellant.
have heard Ms. Meenakshi Arora, learned counsel appearing for the appellant and
Mr. M.L. Verma, learned senior counsel appearing for the respondent.
have perused the notifications and orders passed by the Commissioner and the
Tribunal and other relevant records. Our attention was drawn to the pleadings
and records by the counsel appearing on either side. The points for consideration
in these appeals are as to whether there was an error apparent on the face of
the record of the judgment dated 15.06.1998 as argued by the learned counsel
for the appellant and that whether the Tribunal has erred in holding that the 'Taspa'
yarn is classifiable and assessable to duty of excise under Heading No. 56.06.
Learned counsel for the appellant submitted that the Board's circulars as well
as the fact that there was no core yarn in the disputed goods and hence the
same were classifiable between Chapters 50 and 55 of the Central Excise Tariff
and that the facts of the appellant were closely comparable to the facts of the
case of Pratik Crimpers (supra), the latter judgment of the Tribunal
particularly with regard to the yarns being run parallel, the manufacturing
process being common and the machineries being the same. She also placed before
us the Full Bench decision of the Tribunal which by its final order dated
22.05.2000 upheld the view taken by it in the case of Pratik Crimpers (supra),
which facts and decisions, according to the learned counsel for the appellant,
are similar to the facts of the case on hand. She submitted that the impugned
order suffers from error apparent on the face of the record and hence requires
to be set aside. Arguing further, she urged that the appellant had bona fide
believed that the product in question, namely, filament doubled yarn was
exempted from payment of duty of excise in view of Trade Notice No. 229/88
further submitted that the Tribunal failed to appreciate that in view of the
conflicting decisions on the issue of classification of the filament doubled
yarn, namely, that of Dhamanwala Silk Mills (supra) and the later decision in
the case of Pratik Crimpers (supra), it was appropriate for the Tribunal to
follow the latter decision on the subject. It was contended that the larger
Bench of the Tribunal in the case of Vasania Silk Mills vs. Commissioner of
Central Excise, Surat, 1999 (114) ELT 222 decided the issue and held the `Taspa'
yarn to be classifiable under Chapter 54 and upheld the judgment of the
Tribunal in the case of Pratik Crimpers (supra) while rejecting the view taken
in the case of Dhamanwala Silk Mills (Supra) and since the judgment of the Pratik
Crimpers's case was later in point of time than the case of Dhamanwala Silk
Mills (supra) and since the Tribunal in the case of Pratik Crimpers(supra), had
also considered the Board's circular and the earlier contrary judgment in case
of M/s incumbent on the part of the Tribunal to have considered and applied the
ratio of Pratik Crimpers's case (supra) read with the Board's circular by
passing the impugned order. She further submitted that it is incorrect to state
that merely because the process produces special effect slub/loop, the yarn is
classifiable under Heading No. 56.06 and that for the yarn to be classified
under Heading No. 56.06, the presence of core yarn is mandatory and that there
being no core yarn in the product manufactured by the appellant, the same is
not classifiable under Heading No.56.06.
contra, Shri M.L. Verma, learned senior counsel appearing for the respondent,
submitted that there is no need to refer to any of the judgments cited by the
learned counsel appearing for the appellant inasmuch as the Tribunal while
deciding the present case had gone through the manufacturing process as well as
the contents of the products which led to the decision for classifying the
product under Heading No. 56.06. While in the case of Pratik Crimpers (supra),
no such point was discussed and the decision was given simply on the ground
that the Tribunal had no means of knowing whether the yarn before them was
identical to the yarn before the Tribunal when they gave the cited judgments.
He further submitted that the findings of the Tribunal are not at all contrary
to the Board's circular dated 19.10.1988 and the Board under the said circular
clarified that the instructions applicable to such type of fancy yarn in which
there is a core yarn and that the instructions contained in Board's circular
F.No.55/9/87-CX-I dated 30.6.1987 are not sought to be modified by the letter
dated 26.4.1988 and that both the instructions may be read separately.
According to him, the Tribunal had correctly observed in view of the admission
of the appellant regarding use of core yarn for base yarn that the yarn in
question is a special yarn falling under Heading No. 56.06. He further
submitted that the orders passed by the Commissioner as well as by the Tribunal
are perfectly correct and that the same are not liable to be set aside, as
requested by the appellant and that the orders passed by the Commissioner as
well as by the Tribunal are not perverse as alleged.
support of his contentions, learned senior counsel, relied on some judgments of
this Court. This Court in the case of Reliance Silicon (I) Pvt. Ltd. vs.
Collector, Central Excise, Thane, (1997) 1SCC 215, held that where the
classification of the excisable goods under different excise items involved a
question of highly technical nature requiring scrutiny of the chemical
characteristics of the goods, decisions of the CEGAT cannot be lightly
interfered with unless the findings are perverse or otherwise erroneous in law
or based on no evidence.
case of West Bengal Electricity Regulatory Commission vs. C.E.S.C. Ltd. etc.
etc., JT 2002(7) 578, this Court observed that the High Court merely because it
has unrestricted appellate power, should not interfere with the considered
order of the commission unless it is satisfied that the order of the commission
is perverse, not based on evidence or on misreading of evidence, keeping in
mind the fact that the commission is an expert body.
case of M/s Asian Paints India Ltd. vs. Collector of Central Excise, (1988) 2
SCC 470, this Court held that the finding of fact arrived at on relevant and
valid materials cannot be easily interfered with.
have carefully perused both the orders under appeal. In our opinion, the
Commissioner and the Tribunal have rightly decided that the sample appears to
satisfy the requirements of definition of `Fancy Yarn' as given in the standard
technical literature and appears to be covered under Heading No. 56.06 as
`special yarn' of Central Excise Tariff.
instant case, on collection of intelligence to the effect that the unit has
been manufacturing and removing excisable goods, namely, fancy yarn of the
category of the special yarns specified under Heading No. 56.06 of the Central
Excise Tariff Act, 1985 without payment of duties of excise leviable thereon, thereby
indulging in a large scale evasion of Central Excise duty, the officers of the
Headquarters Preventive Wing, Baroda on the directions of the Deputy Collector
(Prev.), Central Excise and Custom, Baroda visited by surprise the factory
premises of the unit on 29.9.1987 for checks and inquiry. During the course of
their visit, the officers found that the unit was carrying out processes of texturising,
crimping on man made filament yarn etc. for which the unit had installed one Lohia
Magnetic Machine Model No. MT.466 in their factory premises. The officers
further noticed that the unit was manufacturing `Taspa' yarn, for which the
yarns of the different deniers are taken on the aforesaid machine
simultaneously; one yarn which is running in lower speed is known as core/base
yarn, while the other yarn which is running in higher speed is known as slub
yarn, and that the quantity of core yarn and the slub yarn is in the rario 1 :
1.5, and that in the manufacturing of the said `Taspa' yarn the unit had
specially attached devices Tensor and ceramic guide in the said machine by
importing them from Japan. From the invoices and the sale Register of the unit,
it was noticed by the officers that the unit manufactured and cleared `Taspa'
yarn of the description as 20x30 "Nylon x Polyester", 75x75
"Polyester x Viscose", 90x75 "Polyester Filament x
Viscose". In response to the summons dated 20.9.1987, the unit has
produced the invoices and records of purchase and sale from 1983 to 1987 for scrutiny
and examination. On scrutiny of records and invoices, it was revealed to the
officers that the unit had manufactured and removed `Taspa' yarn of the
category of the special yarns specified under Heading No. 5606.00 of the
Central Excise Tariff Act, 1985.
Department also sought the opinion of the Chemical Examiner, Central Excise, Baroda, who by his report submitted as
sample is in the form of two ply yarn having elongated strips (knots) at
regular intervals. It is made of textured polyesters filament yarn and viscose
filament yarn. The two yarns are intertwisted deliberately in such a way so as
to form strips (knots) at regular intervals lengthwise having a different
appearance than the normal constructions of folded yarn." The officers
have also recorded the statement of Shri Vipulbhai Vasantlal Merchant, Partner
of the appellant under Section 14 of the Central Excises and Salt Act, 1944 in
which he stated that they are engaged in processing of yarn such as crimping/texturising
for which they have got one machine of Lohia make Model Ht. 416, which has got
144 spindles; that mostly they are carrying out crimping process on Nylon yarn
of different deniers, as also on polyester filament yarn of various deniers;
and that they have not done any crimping process on pay. He further replied
that for the manufacture of T6 denier polyester crimped yarn as described in
their invoices, they have used two yarns polyester yarn of 75 deniers and the
other viscose yarn of 75 deniers and processed in the same way as described alone
in respect of 20x30 quality yarn there is no slub effect, but in the yarn of 75
deniers quality there is slub effect; and added that they are using the yarns
together in their crimping machine the base yarn is of 75 denier polyester
filament and the slub effect yarn is 75 denier viscose, and that the ratio of
quantity of base yarn to slub effect yarn is 1 : 1.5.
officers have also recorded the statement of Shri Ishwarbhai Durlabhbhai Modi,
Manager of M/s. Ishwar Textiles of Surat, who had purchased 20x30 quality `Taspa'
yarn from the unit. He stated that they had purchased yarns only once from the
appellant and that the yarn was of the description of 2000 `Taspa' yarn, which
consisted of 20 denier Nylon and 30 denier polyester yarn, that the said yarn
had slub effect; that the said yarn was used as weft in the manufacture of
fabrics; that these fabrics also had slub effect and that the said fabrics were
known as `Taspa' fabrics or fancy fabrics.
statement of Shri Maheshwari V. Mehra, partner of M/s. Shreenath Silk Mills, Udhna,
Surat was also recorded. He stated that
they had purchased and received `Taspa' yarn of the quality of 20x30 deniers
and that in this yarn two yarns were crimped together one was Nylon yarn of 20
deniers and the other was polyester yarn of 30 deniers; that the said yarn,
which is known in the market as `Taspa' yarn was having slub effect and that
they had used this Taspa yarn of 20x30 quality in the writ in the manufacture
of sarees and the product they manufactured was called Taspa fabrics. In view
of the test results and the process of manufacture, it was revealed to the
Department that the unit had been manufacturing Taspa yarn/Fancy yarn out of
duty paid polyester filament/Nylon/Viscose yarns with a special process which given
special design and shape to the final yarn. The statement recorded by the
officers clearly shows that the Taspa yarn/fancy yarn manufactured and cleared
by the unit was classifiable and chargeable to duty under Heading No. 5606.00
of the Central Excise Tariff Act, 1985 as is covered within the meaning of
other special yarns from 1.3.1986 onwards and prior to 1.3.1986, under the
category of "All other goods, not elsewhere specified." The
investigation also revealed that the appellant had not obtained Central Excise licence
for such manufacture and that they were removing such yarns without payment of
central excise duty and in the manner otherwise than as provided in the Central
Excise Rules. Thus it is seen that the appellant-unit had contravened the provisions
of Rule 174 read with Section 6 of the Central Excises and Salt Act, 1944, Rule
173F read with Rule 9(1) etc. of the Central Excise Rules, 1944 inasmuch as
they engaged themselves in the manufacture of excisable goods, namely, `Taspa'
yarn/Fancy yarn classifiable and chargeable to duty of excise under erstwhile
Tariff Item 68 prior to 1.3.1986 and under Chapter/sub-heading 5606.00
thereafter of the Central Excise Tariff Act, 1985 without their having applied
for and obtained a licence in Form 14 and failed to determine their liability
to duty in respect of the aforesaid goods manufactured and removed by them
without payment of duty leviable thereon. They have also failed to file
classification lists and price lists as required and failed to prepare and
issue gate passes in the prescribed form for the removals of the aforesaid
goods and further failed to maintain statutory accounts of the production and
removals of the said goods manufactured by them in their factory and suppressed
to supply the material facts with a deliberate and willful intent to evade
payment of Central Excise Duty.
as rightly pointed out by the learned counsel appearing for the respondent, the
conduct of the appellant, as above mentioned, invited the intervention of the
Department since the appellant has committed the offence of the nature as
described in clauses (a), (b), (c) and (d) of sub-Rule (1) of Rule 173Q of the
Central Excise Rules, 1944 by reason of willful misstatement and suppression of
facts with an intent to evade payment of duty. We have perused the reply
submitted by the appellant to the show cause notice to the Collector of Central
Excise and Customs, Baroda. In our opinion, the reply
submitted by them is not satisfactory.
therefore, seen that as per the admission of the appellant, the yarn
manufactured by them is special yarn falling under Heading No. 56.06 and hence
the notifications mentioned by them are not applicable in this case. They also
failed to pay excise duty though they were required to pay duty and hence the
action initiated by the preventive wing is correct. It is very clear from the
findings of the adjudicating authority as well as the appellate authority that
the yarn in question consists of core yarn and hence in view of the above
clarification, the said yarn is correctly classifiable under Heading No. 56.06.
contention of the appellant that they had carried out doubling of yarn on
simple crimping machine and hence fall under Chapters 50 to 55 is not correct
and not acceptable inasmuch as the partner of the said firm in his statement
had specifically stated that for manufacture of the said yarn they had used
special attachment known as Tensor and Ceramic guide which are not required for
simple crimping of single yarn and they also stated that the yarn under
reference are manufactured in such a manner that out of the two yarns, one yarn
acts as a base and the other acts as a covering yarn. Therefore, the process in
the particular case is bound to produce a special effect yarn. The Collector of
Central Excise, in our opinion, has correctly passed the order in original
dated 29.3.1990 after discussing the issue at length and after considering all
the arguments put forth by the notices including the relevant trade notices and
also the Chemical Examiners' report. Likewise, the Tribunal also, after giving
careful consideration to the submissions made by both the sides, did not find
any merit in the rectification application and thus had correctly rejected the
same. The Full Bench decision of the Tribunal wherein the decision taken in the
case of Pratik Crimpers(supra) will not be applicable to the instant case
inasmuch as it was specifically discussed in the order rejecting ROM by the
Central Excise and Gold (Control) Appellate Tribunal that in view of the
process of manufacture there is a core yarn in the yarn in question and hence
the same is classifiable under Heading No. 56.06 and is liable to duty.
the foregoing discussion, we are of the view that the yarn manufactured by the
appellant is only `Taspa' yarn/fancy yarn and is classifiable and chargeable to
duty under Chapter Heading No. 56.06 of the Central Excise Tariff and,
therefore, the appellant is liable to pay duty in contravention of Rule 174
read with Section 6 etc. of the Cenrtal Excise and Salt Act,1944.
not find any error of law or any perversity in the reasoning adopted by the
Commissioner or by the Tribunal on the facts of these cases.
contrary, in our view, the decision of the Commissioner and the Tribunal are
well sustained on the evidence on record and calls for no interference in these
appeals moved by the appellant. We, therefore, confirm the orders passed by the
Commissioner as confirmed by the Central Excise and Gold (Control) Appellate
Tribunal and reject these appeals.
appeals are dismissed. However, in the facts and circumstances of the case, we
order no costs.