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of <h1>Tribunal decision: Upheld demands for exemption misuse, set aside penalties. Yarn norm violation demand set aside.</h1> <h3>M/s. Saradha Terry Products Ltd. and Shri K. Jayaraj Versus CCE, Salem</h3> M/s. Saradha Terry Products Ltd. and Shri K. Jayaraj Versus CCE, Salem - 2015 (327) E.L.T. 675 (Tri. - Chennai) Issues Involved:1. Wrong availment of exemption under Notification No. 8/97-CE dated 01.03.1997.2. Wrong availment of exemption under Notification No. 15/2002-CE dated 01.03.2002.3. Non-utilization of yarn received without payment of duty under CT-3 certificate, in violation of input-output norms prescribed under SION.4. Diversion of imported cotton to M/s. Sona Textiles and consequent demand of customs duty.Issue-wise Detailed Analysis:Issue 1: Wrong Availment of Exemption under Notification No. 8/97-CE dated 01.03.1997The appellant admitted and paid the duty liability of Rs. 6,84,805/- before the issuance of the Show Cause Notice and contested only the demand of interest under Section 11 AB of the CEA, 1944. The Tribunal upheld the demand of Rs. 6,84,805/- and interest, stating that payment of duty before the issue of the show cause notice does not exempt the appellant from paying interest. The Tribunal relied on the decision in Alembic Ltd. Vs. CCE, Vadodara, which supported the mandatory nature of interest once duty is payable.Issue 2: Wrong Availment of Exemption under Notification No. 15/2002-CE dated 01.03.2002The appellant argued that they had duly intimated the department about the availment of the notification and indicated it in all invoices. They contended there was no suppression of facts and no intention to evade duty. The Tribunal upheld the demand of Rs. 70,204/- and interest but set aside the penalty, noting that there was no suppression of facts. The Tribunal referred to the Apex Court judgment in M/s. Pahwa Chemicals Private Ltd., which supported the appellant's contention.Issue 3: Non-utilization of Yarn Received under CT-3 Certificate in Violation of Input-Output NormsThe appellant disputed the demand of Rs. 48,50,530/- for alleged violation of SION norms. They argued that the usage of PVA fibre, which dissolves during processing, should be considered in calculating wastage. The Tribunal found that the department did not dispute the dissolution of PVA fibre and that the actual wastage was below the 25% limit prescribed by the Board's Circular dated 29.12.1986. The Tribunal concluded that the demand based on SION norms without corroborative evidence was unsustainable and set aside the demand of Rs. 48,50,530/-, interest, and penalty.Issue 4: Diversion of Imported Cotton and Demand of Customs DutyThe adjudicating authority dropped the proceedings related to the customs duty demand of Rs. 7,60,806/- for the alleged diversion of imported cotton to M/s. Sona Textiles. This issue was not contested in the appeals.Conclusion:The Tribunal modified the impugned order as follows:- Issue 1: Demand of Rs. 6,84,805/- and interest upheld.- Issue 2: Demand of Rs. 70,204/- and interest upheld; penalty set aside.- Issue 3: Demand of Rs. 48,50,530/-, interest, and penalty set aside.- Penalty imposed on K. Jayaraj set aside.The appeals filed by M/s. Saradha Terry Products Ltd. were partly allowed, and the appeal filed by Shri K. Jayaraj was allowed.
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