TaxTMI 
TaxTMI 
TaxTMI 
2010 (12) TMI 729
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....abric, 13,440 LMtrs of Book-Binding Cloth was seized during the search operation. After investigation, two show cause notices were issued. First show cause notice was issued on 19-3-02 and second show cause notice was issued on 11-3-03, proposing duty demand on different types of fabrics from M/s. Vijay and duty of Rs. 1,54,870/- was also demanded from M/s. Vijeta. Thereafter, adjudication proceedings were completed which resulted in impugned order, wherein the learned Commissioner confirmed the demand of duty of Rs. 1,54,870/- from M/s. Vijeta, with interest and equal amount of penalty under Section 11AC of Central Excise Act, 1944 (the Act). Further, he also confiscated the seized Book- Binding fabric and ordered release of the same on payment of redemption fine of Rs. 50,000/- in lieu of confiscation. Further, penalty of Rs. 50,000/- was also imposed on M/s. Vijay, in connection with the duty being on Book-Binding Cloth. Further, the learned Commissioner confirmed demand of Rs. 20,51,369/- on Gauze fabrics and also imposed penalty of Rs. 20 lakhs under Rule 173Q of Central Excise Rules, 1944. He dropped the demand of Central Excise duty amounting to Rs. 50,48,230/- on Interlinin....
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....gards decision of the Commissioner on the issue of seized Book-Binding Cloth. Commissioner has imposed fine of Rs. 50,000/- in lieu of confiscation. Taking note of the fat that the duty liability itself would come to Rs. 30,000/- approx., we consider a fine of Rs. 20,000/- in lieu of confiscation sufficient. Applying the same logic and also taking note of the fact that penalty relates to only seized fabric, penalty on M/s. Vijay as regards Book-Binding cloth is reduced to Rs. 20,000/-. 6. As regards duty demand of Rs. 1,54,870/- on Book-Binding Cloth against M/s. Vijeta, the appellant M/s. Vijeta has put forth the same grounds which were put forth before the Commissioner viz. Revenue has not proved which brand name or trade name of which customer were affixed by M/s. Vijeta; the entire obligations of M/s. Vijeta affixing brand name/logo of customer on Book-Binding Cloth was vague/un­substantiated as no details of brand name/trade name/logo was given by the Revenue. 7. We find that Shri Yunusbhai S. Dewdiwala, partner had admitted in his statement that Book-Binding Cloth was invariably cleared after affixing brand name or trade name with the logo or monogram as well ....
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....d name/trade name belonged to M/s. Vijeta. Under these circumstances, confirmation of demand of Rs. 1,54,870/- has to be upheld. 9. Further, penalty of Rs. 1,54,870/- has also been imposed under Section 11AC besides demanding interest. Both are to be upheld in view of the fact that there was no intimation by M/s. Vijeta to the department that they were using the brand name/trade name of someone else and therefore suppression of facts has been rightly invoked and penalty under Section 11AC of the Act is also correctly imposable. However, in view of the decision of this Tribunal in case of CCE v. M/s. Swati Chemicals & Others, 2009 (94) RLT 684 (CESTAT) = 2009 (248) E.L.T. 421 (Tribunal) as also decision of Hon'ble High Court of Gujarat in the case of M/s. Exotic Associates v. CCE, 2010 (252) E.L.T. 49 (Guj.), an option to pay 25% of the duty and interest within 30 days of the order in full discharge of the obligation arising out of the order, is required to be given and when not given, such option can be given by the Tribunal. 10. As regards Interlining fabric, the Commissioner has relied upon the decision of the Hon'ble Supreme Court in case of CCE, AHD. v. Susma Textil....
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....pe of the notification is not permissible. 11. According to the show cause notice, the padding compound is prepared by mixing inorganic chemical compounds and fillers like White Cement, Tar, China Clay, Tinopal etc. along with Maize Starch, tapioca starch etc. Further, the fabric is also subjected to back filling wherein the compound may be inorganic fillers were applied to the length and breadth of the weave of the fabric. In fact, department contended that the process undertaken by M/s. Vijay would amount to coating and it cannot be considered as padding process as defined at Sr. No. 116 of Notification No. 3/2001. However, M/s. Vijay contended that it is not prescribed in the notification that no other inorganic substances could be mixed with the starch for padding process and if any inorganic material is mixed, the process would not amount to padding. It was submitted that padding solution could not be prepared only by starch or fatty material because other materials have to be used for proper application of starch. It was submitted that exemption for padding process would be available so long as it is not a coating process which will render the fabric classifiable under ....
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....en fabric is entirely composed of cotton. Woven fabric = 13.5% by weight Balance is coated material. A set of (Fresh) samples : CLR/SK-8/37, dated 15-5-02 (Interlining cloth, also known as Sheeting, Buckram Cloth etc.-M/s. Vijay Textiles, Ahmedabad) The sample is in the form of bleached stiff fabric. It consists of plain weave, light weight woven fabrics heavily coated with gum, starchy matter and inorganic mineral matter. The interstices between the yarns are not completely closed. The sample is not impervious to water and looses the stiffness in contact with it. Woven fabric is entirely composed of cotton. Woven fabric = 13.2% by weight Balance is coated material. 12. Unlike the case of M/s. Susma Textile Pvt. Ltd., the report of the chemical examiner in this case, does not at all say that the process undergone by the respondent's fabrics is padding. All the 3 test reports relating to sample, Central Revenue Control Laboratory, nowhere mentioned that the process undertaken by the assessee is padding. Further, as rightly submitted by the learned SDR, the issue in the case of M/s. Susma Textiles was classification of the fabrics and not as to what amounts to padding a....
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....ble Supreme Court would apply to the facts of the case and the appellant is eligible, would mean that two views are possible. Further, the case made in the show cause notice was that the process amounted to coating and in fact, test report does not show that the process amounted to coating. Further, process similar to one adopted by appellant in this case was adopted by M/s. Susma Textiles also and in that case, the Chemical Examiner has taken a view that the process was padding. Even in this case, we have not taken a view that the process is not padding, but we have taken a view that since exemption notification defines padding, the process will become ineligible for exemption has to be agreed. If the intention behind providing exemption to the process of padding as understood in the trade also, there was no need to define the same. The very fact that exemption notification defines padding supports the appellant's ineligibility for exemption inasmuch as the padding undertaken by the appellant is not as per the definition. The above discussion shows that this is a question of interpretation and the assessee cannot be found fault with, if it entertains a bona fide belief that the pa....
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....r producing medicinal gauze. He relied upon the decision of Hon'ble Supreme Court in case of M/s. Mehta Nettings Pvt. Ltd. - 1997 (92) E.L.T. 452 (S.C.) to support his contention that Mosquito Net farbics fell under Chapter 52 of the Tariff. 20. We find that the reliance of the learned advocate on the decision of the Hon'ble Apex Court is mis-placed. In that case, the allegation in the show cause notice was that round mosquito nettings have been woven on the roller locker machine. Therefore, there were not classifiable under CH No. 52.06. The appellant in that case had relied upon Rule 96MMM of Central Excise Rules, 1944, which reads as under. Rule 96MMM of Central Excise Rules, 1944 : "Reckoning of roller locker machines - where roller locker machines are installed, either exclusively or in addition to any other type of power loom every metre of the width of such machine shall be reckoned as one power loom and where the total width is in excess of whole metres, any fracation less than half a metre shall be ignored and any fraction of half a metre or more shall be increased to one whole metre." 21. It was contended that it was statutorily recognized that roller locker....
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....rved in the sample satisfy the definition of Gauze Fabrics as laid down under Chapter Note 3 to Chapter 58 of CETA, 1985. It looses the stiffness in contact with water. Woven fabric = 70.1% by weight Balance is stiffening material." 24. Further, the Commissioner has also considered the explanatory note to HSN Ch. 58.03 which clarifies as under : "Gauze (sometimes known as leno weave) is defined in Note 3 to this Chapter. In plain gauze, the crossing threads run alternately to the right and left of each standing thread passing over the weft every time but crossing under the standing threads; the standing warp threads are always on one side of the weft, and the standing warp and the weft are not interlaced but are held together by the crossing warp. Variations can be obtained by the crossing threads crossing with each other (so called crocheted gauze, Marly gauze), by inserting two or more weft threads together through the loops formed by the standing and crossing threads, by using two or more standing threads per crossing thread and vice versa, etc. This heading also includes : (1) Broche gauze, manufactured with an extra thread (broche thread) introduced duri....
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....d crossing threads and standing threads. It has to be noted that basically this letter only explains the meaning of warp threads in technical parlance and as understood by the trade which had not been explained in the original test report. Obviously so because it is generally assumed that when technical matters are dealt with, technical meaning are assigned to the terms used. Once the meaning as clarified by the Chemical Examiner is assigned, the test report would read as under :- "Each of five samples is cut piece of white open weave fabric. Warp yarns composed of standing threads and crossing threads and form loops through which weft yarns pass". Basically the question to be examined is whether plain weave and open weave are same which is the assumption on the basis of which Commissioner has passed order. Plain weave fabrics falling under Chapter 52 and leno gauze fabrics which fall under Chapter 58 are entirely different. 3.2 Plain weave has been explained in sub-heading note to Section XI as "a fabric construction in which each yarn of the weft passes alternatively over and under successive yarns of the warp and each yarn of the warp passes alternately over and under succ....
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....t be used for medicinal purpose and therefore they cannot be classified under CETH 58.03. We agree with the conclusion of the Commissioner that end use is not relevant. In fact, end use aspect was also considered by this Tribunal and it was observed that it is applicable only to plain weave fabrics and not to leno weave fabrics. 28. Learned Advocate on behalf of the appellants argued that the classification cannot be considered at the receiver's end. M/s. Vijay was only job worker engaged in bleaching, dyeing, padding etc. and did not have any facility for weaving fabric. What M/s. Vijay has received is Mosquito Net fabrics for processing duly classified under Heading 52.07 of the tariff by the respective merchants/processors who had supplied the fabrics. Learned Commissioner in his order, observed that the demand is upto the period of 2001 and in the delivery slips up to the year 2001, no classification of the fabrics was mentioned. He has also observed that the challans submitted by them wherein the mosquito net cloth classification was mentioned as 5207.31 related to the period 2003-2004 and therefore are not relevant in the present case. 29. The same submissions wer....
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....declaration. They failed to declare what was received by them for undertaking processes like padding, calendaring etc was in fact leno/gauze fabrics and this led to availment of ineligible exemption. Therefore, we cannot find fault with invocation of extended period under Section 11A of the Act. As regards penalty, we find that the total demand of duty is Rs. 20,51,369/- and penalty imposed is equal to the duty. In this case, penalty under Section 11AC has not been imposed and penalty has been imposed under Rule 173Q of Central Excise Rules, 1944. Having regard to the facts and circumstances of the case and taking into account the fact that the appellant is only a job worker, we find that penalty imposed is high. Accordingly, we reduce it to Rs. 5 lakhs. (Rupees Five Lakhs only). 32. Revenue is in appeal against the decision of the Commissioner for not imposing any penalty on the two partners viz. Shri Yunusbhai S. Dewdiwala and Shri Shabirbhai S. Dewdiwala, both being the partners of M/s. Vijay. He has come to this conclusion, considering that the specific role played by each one of them has not been brought on record. It was submitted by the Revenue that role of the partner....