Case Law Details
Jindal Texofab Ltd. Vs C.C.E. (CESTAT Ahmedabad)
The main issue involved in the present appeals is whether M/s. JTL is liable to central excise duty in relation to finishing process of stentering of fabrics sent by M/s. Shrinathji Textiles and removal of such finished fabrics under the delivery slips to various parties from its premises. While denying the very activity having been carried out at its premise, it was the contention of the appellants before the authorities below that even if it is held that M/s. JTL carried out the process of stentering on fabrics sent by M/s. Shrinathji textiles, process of stentering does not amount to manufacture as such process do not bring about a change in the fabrics which is of lasting nature and no new or distinct goods thereby has come into existence. Learned commissioner (appeals) in the impugned order has held that although stentering of fabrics falling under chapter 52 does not amount to manufacture, however, since M/s. JTL was also carrying out other finishing processes specified under chapter note 3 to chapter 52 and stentering process in respect of fabrics falling under chapter 54 and 55 of the Central Excise Tariff Act, 1985; M/s. JTL is yet liable to duty.
In this regard, it can be seen that learned commissioner (appeals) (at para 9.8 of the impugned order) has relied upon the statement dated 05.06.2002 of Mr. Kailash S. Jalan, power of attorney holder of M/s. Shreenathji Textiles, in which he has stated that M/s. JTL has carried out process of stentering etc on the hand bleached/dyed/screen print fabrics sent by M/s. Shreenathji Textiles in the factory of M/s. JTL. However, on perusal of records (para 45 & 47 of the SCN) it transpires that it is not the case in the show cause notice that M/s. JTL carried out process other than stentering nor is there a specific case or evidence referred in the SCN that M/s. JTL carried out processes on the fabric falling under chapter 54 & 55 of CETA, 1985 which otherwise also do not specifically include stentering as a process amounting to manufacture. In absence of such a case in the SCN and in absence of evidence to show that M/s. JTL carried out process other than stentering of fabrics falling under chapter 52 or carried out process on the fabric falling under chapter 54 or 55, demand of duty as against M/s. JTL cannot be sustained.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The present appeals are directed against Order-In-Appeal (OIA) No. AHM-EXCUS-001-APP-019 to 022/2022-23 dated 06-06-2022 passed by the Commissioner (Appeals) of Central Excise, Ahmedabad. M/s. Jindal Texo Fab Ltd (“M/s. JTL”) Plot o. 103-104, Phase I, GIDC, Vatva, Ahmedabad 382445 is the appellant upon whom the duty demand of Rs. 20, 07,924.04/- has been upheld under provisions of section 11A(4) of the Central Excise Act, 1944 (“Act”) along with equal penalty under section 11AC(1)(c) of the Act and Mr. Gyansingh Sisodiya is the Director of the appellant upon whom penalty of Rs. 5,00,000/- under Rule 26 of the Central Excise Rules, 2002 (erstwhile Rule 209A of the Central Excise Rules, 1944) has been upheld (referred to as “Appellants” herein after).
2. Briefly, the fact of the case are that M/s. JTL is engaged in the processing of cotton fabrics falling under chapter 52. On 18-8-2001, officers of central excise department during search, seized various records including a file containing delivery slips, based on which statements of some of the buyers mentioned in the delivery slips were recorded who inter alia stated that they used to purchase processed fabrics from M/s. JTL but were receiving bills of M/s. Shrinathji textiles wherein the fabrics were shown as hand dyed/bleached/screen printed.
Based on delivery slips and various statements including director of M/s. JTL, it was the revenue’s case in the show cause notice (SCN) dated 15-12-2005 that during the period March 2001 to May 2001 a quantity of 11,12,820 L meters of fabrics which was hand dyed/bleached/printed at M/s. Shrinathji textiles was sent to M/s. JTL’s factory for Stentering and that such process of Stentering carried out with aid of power attracted central excise duty, but was cleared from JTL’s factory without payment of duty amounting to Rs. 20,07,924.04. Learned Additional Commissioner adjudicated the SCN and vide Order-In-Original (OIO) dated 11-01-2007 confirmed the duty demand and imposed penalty equivalent to duty, he further imposed Rule 26 penalty upon the Director of the appellant amounting to Rs. 5,00,000/-. Learned commissioner (appeals) vide OIA dated 30-05-2007 except for reducing the penalties, rejected the appeal of the appellants. Both, appellants and the department preferred appeal and this Tribunal vide Order No. A/1112 to 1115/WZB/AHD/2007 dated 29-5-2008 remanded the matter to Learned commissioner (appeals) with a direction to consider the plea of the appellant that process of Stentering does not amount to manufacture. Learned Commissioner (appeals) thereafter vide OIA dated 31-12-2008 again confirmed the duty demand maintaining the reduction of penalties. The appellants preferred appeal against the said OIA dated 31-12-2008 and this Tribunal vide Order No. A/11490-11493/2018 dated 25.07.2018 remanded the case back to the adjudicating authority interalia with a direction to examine the issue of examination of witnesses in terms of section 9D of the Act and in denovo proceedings the adjudicating authority vide OIO dated 18-03-2021 confirmed the duty demand along with penalty equivalent to duty and imposed penalty of Rs. 5,00,000/-upon the Director of M/s. JTL without acceding the request of the appellants to grant cross-examination of the witnesses in terms of section 9D of the Act and inter alia held that M/s. JTL is not eligible for nil rate of duty as M/s. JTL had machineries installed in its factory and since fabrics were processed with the aid of power; the condition of exemption notification no. 3/2001-CE dated 1.3.2001 is violated, accordingly he imposed penalty upon M/s. JTL and on the other co-noticees. The appellants preferred appeal against the said OIO dated 18-03-2021 before the learned commissioner of central excise (appeals) who upheld duty demand of Rs. 20,07,924.04/- and further imposed penalty of Rs. 20,07,924.04/- upon M/s. JTL and Penalty of Rs. 5,00,000/- upon Mr. Gyansingh Sisodia under Rule 26 and as regards the other co-appellants he remanded the matter. It is against this order of learned commissioner (appeals) appellants M/s. JTL and Mr. Gyansingh Sisodia are in appeal before this Tribunal.
3. Shri Rahul Gajera, learned counsel appearing for the appellants submitted that learned commissioner (appeals) could not have relied upon the statements straight way without having examined the deponents in this behalf circumventing the specific direction of this Hon’ble Tribunal to consider the plea of following the procedure mandated by section 9D of the Act; those deponents having not retracted the statements is not any of the exceptions stated under the provisions of section 9D of the Act. He submitted that when after two rounds of litigation finally learned commissioner (appeals) acceded that process of stentering does not amount to manufacture, however, as though there was compulsion to confirm duty, he proceeded to confirm the duty on some other ground exterior to SCN that appellant was also carrying out other processes on fabrics falling under chapter 52 and of fabrics falling under chapter 54 & 55 of CETA, 1985 which amounted to manufacture; that while denying that M/s. JTL carried out Stentering on the hand dyed/bleached/screen printed fabrics received from M/s. Shrinathji textiles, particularly disputing the quantity of 11,12,820 L mts, he urged that even otherwise no duty can be demanded from M/s. JTL, as M/s. JTL was not the manufacturer of the fabrics in question, as per para 37 of the SCN, M/s. JTL merely allowed use of its Stenter to M/s. Shrinathji Textiles whose employee Yogesh Shah was posted in the factory of M/s. JTL, that since the material and labour was that of M/s. Shrinathji textiles who used the Stenter and premises of M/s. JTL; the manufacturer has to held as M/s. Shrinathji textiles and not M/s. JTL, that merely because a person gives his machinery to another who carries out the process, the former does not become the manufacturer as laid down in the case of Sant Processors v. Commissioner of Central Excise – 2015 (327) ELT 700.
4. Shri V.G.Iyengar, Learned (Superintendent) Authorized Representative appearing for the Revenue reiterated the findings given in the impugned Order and submitted that impugned order is legal and proper.
5. We have heard both the sides and perused the records. The main issue involved in the present appeals is whether M/s. JTL is liable to central excise duty in relation to finishing process of stentering of fabrics sent by M/s. Shrinathji Textiles and removal of such finished fabrics under the delivery slips to various parties from its premises. While denying the very activity having been carried out at its premise, it was the contention of the appellants before the authorities below that even if it is held that M/s. JTL carried out the process of stentering on fabrics sent by M/s. Shrinathji textiles, process of stentering does not amount to manufacture as such process do not bring about a change in the fabrics which is of lasting nature and no new or distinct goods thereby has come into existence. Learned commissioner (appeals) in the impugned order has held that although stentering of fabrics falling under chapter 52 does not amount to manufacture, however, since M/s. JTL was also carrying out other finishing processes specified under chapter note 3 to chapter 52 and stentering process in respect of fabrics falling under chapter 54 and 55 of the Central Excise Tariff Act, 1985; M/s. JTL is yet liable to duty.
5.1 In this regard, it can be seen that learned commissioner (appeals) (at para 9.8 of the impugned order) has relied upon the statement dated 05.06.2002 of Mr. Kailash S. Jalan, power of attorney holder of M/s. Shreenathji Textiles, in which he has stated that M/s. JTL has carried out process of stentering etc on the hand bleached/dyed/screen print fabrics sent by M/s. Shreenathji Textiles in the factory of M/s. JTL. However, on perusal of records (para 45 & 47 of the SCN) it transpires that it is not the case in the show cause notice that M/s. JTL carried out process other than stentering nor is there a specific case or evidence referred in the SCN that M/s. JTL carried out processes on the fabric falling under chapter 54 & 55 of CETA, 1985 which otherwise also do not specifically include stentering as a process amounting to manufacture. In absence of such a case in the SCN and in absence of evidence to show that M/s. JTL carried out process other than stentering of fabrics falling under chapter 52 or carried out process on the fabric falling under chapter 54 or 55, demand of duty as against M/s. JTL cannot be sustained.
5.2 As regards, the other issues, the entire case of the revenue is that the seized delivery slips are in respect of fabrics subjected to Stentering in the factory of M/s. JTL is based on statements of the Director of M/s. JTL, proprietor and power of attorney holder of M/s. Shrinathji Textiles, some buyers and warehouse keeper. Despite specific direction to consider the plea of the appellants as per this tribunal order dated 25.07.2018, none of these persons have been examined as witness or cross-examination was given by adjudicating authority in terms of section 9D of the Act. It can be seen that statements having not been retracted, as held by the authorities below, is not the exception provided under section 9D of the Act and therefore as laid down in the following judgments, their testimony has to be excluded from consideration:
– Basudev Garg v. C.C. – 2013 (294) ELT 353 (Del.)
– G-Tech Industries v. Union of India – 2016 (339) ELT 209 (P & H)
It can be seen that excluding the statements, there is no evidence to show that the delivery slips were in respect of fabrics subjected to Stentering in the premises of M/s. JTL. Moreover, Yogesh Shah who is supposed to have written the delivery slips and who is supposed to have supervised, on behalf of M/s. Shrinathji Textiles, the process of stentering at the premise of M/s. JTL, has also not been examined in the investigations and in adjudication. Further, when revenue is relying upon the statement dated 05.06.2002 of power of attorney holder of M/s. Shrinathji textiles who has accepted to have sent only 5 lakhs L meters of fabrics the allegation of M/s. JTL having stentered 11,12,820 lm of fabrics is not substantiated, and in view of said contradiction of facts, cross-examination of witnesses could not have been denied. There is otherwise no reliable evidence showing the said quantity of 11,12,820 L meters fabrics was stentered by the appellant in its premise. In the circumstances, duty demand cannot be sustained upon M/s. JTL. Since duty demand cannot be sustained, penalties upon the appellants are also liable to be set aside.
5.3 In view of the above, the impugned Order-In-Appeal passed by the Learned Commissioner (Appeals) is set aside. The appeals are allowed with consequential relief.
(Pronounced in the open court on 21.12.2022)
