TaxTMI 
TaxTMI 
2006 (8) TMI 428
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.... appeal No. E/491/2005, under Rule 209A of the Central Excise Rules, 1944 and Rule 26 of the Central Excise (No. 2) Rules, 2001. A small part (about Rs. 55 lakhs) of the duty demanded is for the period up to 15-12-98 and the same is in terms of Section 3 of the Central Excise Act and the rest of the demand of duty (for the period from 16-12-98 to 28-2-2001, hereinafter referred to as "compounded levy period") is under Compounded Levy Scheme in terms of Section 3A of the Act. While the demand of duty for the period up to 15-12-98 is challenged only on the ground of limitation, the demand of duty as compounded levy is challenged both on merits and on limitation. The invocation of extended period of limitation for the entire demand has been questioned by the Mills on the ground that they had no intention to evade payment of duty. On the same ground, they have also challenged the penalty imposed on them under Section 11AC. Co-optex have challenged, the imposition of penalty on them by pleading that they did not abet commission of any offence by the Mills. 2. The Mills were engaged in the processing (bleaching, dyeing, printing, stentering etc.) of woven fabrics of cotton and man-mad....
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....essed the same and removed without payment of duty by claiming exemption under the aforesaid Notifications. The Mills have conceded their duty liability in respect of the processed powerloom fabrics supplied to Co-optex. It is, however, submitted by them that (i) as the fabrics for processing were received from a handloom weavers' society, they had no reason to think that the goods were powerloom fabrics (ii) the delivery challans (IETs) under which such fabrics were despatched to them by Co-optex did not specify the goods as "handloom fabrics" (iii) as handloom and powerloom woven fabrics looked alike, it was not possible for them to distinguish one from the other and (iv) they processed the powerloom fabrics, thinking that the same was handloom fabrics. On this basis, it is contended that the Mills had no intention to evade payment of duty while clearing the processed powerloom fabrics to Co-optex. Ld. consultant has argued that, as the Mills, during the material period, were not aware of the fact that the grey fabrics received from Co-optex and processed by them (Mills) were powerloom fabrics, they cannot be held to have suppressed anything before the Department with intent to e....
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.... they would be processing only handloom fabrics, the Mills should have taken precautions to ensure that they did not process any powerloom fabrics. According to ld. SDR, it would appear from these circumstances that the Mills were aware of the fact that some of the grey fabrics supplied by Co-optex were powerloom fabrics and that the processed powerloom fabrics returned to Co-optex were dutiable. It was in 2001 when Departmental officers visited them that the Mills disclosed these facts. The Mills had suppressed the facts with intent to evade payment of duty and, therefore, the extended period of limitation has been rightly invoked to demand the duty from them. Learned SDR has also endeavoured to distinguish the facts of the instant case from those of Padmini Products (supra) and Tamil Nadu Housing Board (supra). She has also relied on the apex court's judgment in TNHB case, to argue that, once the initial burden of showing suppression of facts by the party was discharged by the Department, the burden shifted to the party, whose liability it was to show that they had no intention to evade payment of duty. In the present case, according to learned SDR, the Mills did not discharge th....
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....s on payment of duty on ad valorem basis. During that period, processed handloom fabrics were cleared without payment of duty on account of exemption. This would indicate that the Mills could differentiate powerloom fabrics (dutiable) from handloom fabrics (exempted) during that period. One of the documents considered by the Commissioner is a letter dated 8-1-99 of the Mills addressed to M/s. Tamil Nadu Textile Corporation, Coimbatore. In this letter, the Mills requested M/s. Tamil Nadu Textile Corporation to take back their grey powerloom fabrics lying in the mill as they (the Mills) had decided to process only handloom fabrics from 16-12-98 onwards. This would also go to show that the Mills were able to identify grey powerloom fabrics from grey handloom fabrics. Shri N. Bhaskaran, who was Production Supervisor of Co-optex during 1989 to 1995, in his statements given to the investigating officers of the Department, confirmed that the difference between powerloom fabrics and handloom fabrics was visible at grey stage. In 1999, after Compounded Levy Scheme was introduced, the Mills gave an undertaking to the Commissioner that they had stopped processing powerloom fabrics. Such an un....
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....brics received from Co-optex at all times, irrespective of whether the goods were described in the relevant delivery documents or not. It, further, appears from the records that the Mills had gathered certificates from the Karnataka Handloom Development Corporation and the Kerala State Handloom Development Corporation regarding the identity of the fabrics but did not bother to collect similar certificates from Co-optex during the material period. It is thus evident that, when the Mills were removing the subject goods (processed powerloom fabrics) without payment of duty, they were aware of the fact that they were removing dutiable goods. They were so doing apparently with intent to evade payment of duty. 7. In his endeavour to show that the above removals of dutiable goods without payment of duty were occasioned by lapses on the part of Co-optex, learned Consultant referred to Notification No. 27/92-C.E. (N.T.), dated 9-10-92, which reads as under :- "In exercise of the powers conferred by sub-rule (2) of rule 174 of the Central Excise Rules, 1944, the Central Board of Excise and Customs, hereby exempts from the operation of rule 174 of the said rules every manufacturer....
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....iod of dispute, without disclosing to the Department the correct identity of the goods. They have not shown that their monthly returns contained any particulars enabling the Department to discern that they had actually removed processed powerloom fabrics. It was only after visit by Departmental officers to their premises that the Mills admitted having removed dutiable goods without payment of duty. Suppression of material fact with intent to evade payment of duty is evident in this case. 9. We have considered the decisions cited before us. In the case of Padmini Products (supra), it was held that, where there was scope for doubt as to whether the goods were dutiable or not, the extended period of limitation under the proviso to Section 11A(1) would not get attracted. In the present case, there was no scope for the Mills to doubt whether grey fabrics processed by them were handloom fabrics or powerloom fabrics. In TNHB's case, it was held that the assessee must be aware that duty was leviable and must be found to have deliberately avoided paying duty so that the extended period of limitation could be invoked for demanding the duty from them. This condition, in our view, stands sa....