TaxTMI 
TaxTMI 
TaxTMI 
2009 (7) TMI 591
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....for manufacture of grey cotton fabrics (other than denim fabrics) not subjected to any process falling under Central Excise Tariff sub-heading 5207.20, attracting NIL rate of duty. Survey of the factory however revealed that PM was also engaged in the manufacture of yarn dyed fabrics commercially known as Denim Fabrics for M/s. KG Denim Ltd., Mettupalayam (herein after referred to as KGD). In the invoices raised by PM for the sale of Denim Fabrics to KGD, the description of fabrics sold was not indicated but only sort numbers were indicated. A file containing purchase orders with the specification of fabrics required by KGD pointed to manufacture of warp dyed fabrics commercially known as 'denim fabrics'. The Assistant Weaving Manager of PM....
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....hase orders placed by KGD recovered from the premises of PTM revealed details identical to the one found and recovered from PM and the method of manufacture and procedure of clearance of denim fabrics to KGD by PTM was similar to that of PM. Statements of Deputy Weaving Manager and office Manager of PTM were recorded, in which they admitted the manufacture of yarn dyed fabrics commercially known as Denim fabrics and also accepted that majority of sort numbers of fabrics manufactured for KGD conformed to the definition of Denim Fabrics as per Note 4 of Chapter 52 of first schedule to CETA, 1985. The office manager admitted that the fabrics manufactured by PM were cleared without payment of duty and he agreed to pay duty before issue of Show ....
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....of Rs.34,12,380/- on denim fabrics cleared during the same period by invoking the extended period of limitation, proposing levy of interest under Section 1AB and imposition of penalty under Section 11AC of the Act, proposing confiscation of denim fabrics under Rule 25 of CER and proposing imposition of penalty on the Managing Director of PTM under Rule 26 of CER 2001/2002. The notices were adjudicated by the Commissioner of Central Excise who vide the impugned order confirmed the demand of Rs.79,72,224/- on PM together with appropriate interest, and imposed a penalty of equal amount on PM, and penalty of Rs. Five lakhs on Shri M. Thiagarajan, confirmed a duty demand of Rs.33,04,023/- on PTM together with interest and penalty of equal amount....
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....assessee that the goods were not marketable as Denim fabrics for the reason that the processes of singeing and finishing had not been carried out, cannot be accepted. We therefore hold that the unprocessed yarn dyed fabrics manufactured by PM & PTM to KGD are denim fabrics liable to duty. 6. The demand has been confirmed on manufacture and clearance of denim fabrics on their own account against PM & PTM. The transaction between KGD on one hand and PM/PTM on the other is in the nature of 'principal to principal' in as much as there was sale of goods. PM & PTM have procured their own material and manufactured Denim fabrics and cleared the same without payment of duty. The quantity of denim and sized fabrics received for weaving from KGD and ....
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.... of the department only after the search of premises of PM/PTM and recovery of records. Reliance placed by PM/PTM on a letter dated 28-6-01 written by KGD to the department to support their plea that the department had knowledge of clearance of goods, is misplaced for the reason that the letter neither disclosed that the fabrics were unprocessed denim fabrics nor disclosed that the fabrics were sold to KGD. Although one of the appellants namely PM had intimated the Superintendent Mettupalayam Range (KGD jurisdictional Superintendent) vide his letter dated 26-7-01 about the sale of fabrics, nothing has been mentioned as to whether duty will be paid thereon. The monthly returns also described the goods as unprocessed cotton fabrics instead of....