TaxTMI 
TaxTMI 
TaxTMI 
2015 (11) TMI 1033
X X X X Extracts X X X X
X X X X Extracts X X X X
....h and Shri Mohinder Singh as its Directors. Shri Bhupinder Singh, Shri Satnam Singh and Shri Mohinder Singh are the real brothers. The period of dispute in this case is from 1/4/1999 to 14/11/2000. During this period, RWM was a trading company. 1.2 SBM and RD face the following allegations of duty evasion: 1.2.1 Allegation against SBM is that during the period of dispute, they were evading duty by grossly under-valuing grey acrylic spun yarn being cleared by them to RD and RWM and the basis of this allegation is that-(a) the price at which the grey acrylic spun yarn was being cleared by SBM to RD & RWM was much less than the cost of production; (b) SBMs sale price to RD & RWM was also much lower than the price at which the spun yarn was being sold to other buyers including a number of buyers who were purchasing the yarn in cash and (c) the circumstances that while the factories of SBM and RD are owned by the RWM and the same had been given on lease by RWM to SBM and RD, no lease rent was being paid and though SBM were selling huge quantity of grey acrylic spun yarn to RD, payment was not being received even after an year, while the same goods were being sold to other customers b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder section 11AB and besides this, (b) imposed penalty of Rs. 5,19,100/- on SBM under section 11AC and another penalty of Rs. 50,000/- on them under Rule 173Q (1) of Central Excise Rule, 1944, (c) confirmed duty demand of Rs. 15,14,161/- against RD on account of wrong availment of the exemption under notification no. 5/99CE and 6/2000-CE under proviso to section 11 A(1) of the Act along with interest on it under section 11AB and also confirmed the duty demand of Rs. 36,78,122/- against RD under proviso to section 11A(1) of the Act on the account of the allegation of clandestine removal along with interest on it under section 11AB and besides this, imposed penalty of Rs. 51,92,283/- on RD under section11AC and another penalty of Rs. 5 lakh on them under section 173Q (1) of the Central Excise Act, 1944 and (d) imposed penalty of Rs. 5 lakh each on Shri Satnam Singh, Shri Mohinder Singh and Shri Bhupinder Singh under Rule 209A of Central Excise Rules, 1944. Against this order of the Commissioner, these appeals have been filed. 2. Heard both the sides. 3. Shri B.L. Narsimhan, Advocate, ld. Counsel for the appellants, pleaded that the allegation of under valuation against SBM in resp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lity, exemption notification no. 5/99 and 6/2000 CE cannot be denied to RD in respect of the finished yarn (dyed yarn) manufactured and cleared by them out of the grey acrylic spun yarn purchased from SBM; that the condition for exemption under notification no. 5/99 and 28/1999CE is that the dyed yarn has been manufactured out of the yarn on which appropriate duty of excise and the special duty of excise leviable under said schedule to the Central Excise Tariff Act, 1985 or as the case may be, the additional customs duty leviable under the Customs Tariff Act, 1975 has been paid and no credit of the duty paid on the grey yarn or other inputs had been availed; that in this regard, the expression appropriate duty of excise under the said schedule has to be interpreted as payment of duty at the correct rate; that in this regard he relies upon the judgment of the Apex Court in the case of Commissioner of Central Excise Vadodara Vs. Dhiren Chemical Industries reported in 2002 (139) ELT 3 (S.C.) in para 5 of which the Apex Court has held that the word appropriate used in the notification in the context means the correct or the specified rate of duty; that since the duty has been paid at ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....received even after an year; that these circumstances and a number of other circumstances clearly indicate that SBM, RD and RWM were being run by the three brothers as one entity and hence, there is mutuality of interest between SBM on one hand and RWM and RD on the other hand; that during the period of dispute, the price at which grey acrylic spun yarn was being sold by SBM to RD and RWM was less than its cost and was even less than the price at which the same yarn was being sold to other buyers in cash; that in these circumstances, the Commissioner has rightly rejected the assessable value adopted by SBM in respect of their sales to RD and RWM and has determined assessable value on the basis of average purchase price of grey acrylic spun yarn by RD from other suppliers; that in view of this, the duty demand of Rs. 5,19,100/- has been correctly confirmed against SBM; that since SBM in respect of the yarn sold by them to RD had not paid the appropriate Central Excise duty leviable, RD would not be eligible for exemption under notification no. 5/1999CE and 6/2000 CE in respect of the dyed yarn manufactured by them out of the grey acrylic spun yarn purchased from SBM, as one of the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....emoved clandestinely; that there was no justification for SBM to sell the grey acrylic spun yarn to RWM, who was selling only dyed yarn, that similarly, there was no justification for cash sale of the grey acrylic spun yarn by SBM to other buyers that the entire quantity of grey acrylic spun yarn shown to have been sold by SBM to a number of other buyers in cash and to RWM has actually been diverted to RD from where the same had been cleared, clandestinely after being subject to dyeing and that in view of this, the duty demand of Rs. 36,78,122/- is on strong footing. Shri Khanna accordingly pleaded that there is no infirmity in the impugned order. 5. We have considered the submissions from both the sides and perused the records. 6. The first point of dispute is about the duty demand of Rs. 5,19,100/- confirmed against SBM on the base of allegation of under valuation. The evidence relied upon by the department in support of the allegation of under valuation against SBM is that-(a) all the three entities, SBM, RD and RWM are being run as one business concern and are being controlled by the same persons in as much as-(i) while SBM is a partnership concern of Shri Satnam Singh and hi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....regarding duty demand of Rs. 15,14,161/- against RD on the basis of wrong availment of exemption notification no. 5/99 and 6/2000 CE. Under these notifications concessional rate of duty in respect of the dyed yarn is available only if dyed yarn has been manufactured out of the yarn on which appropriate duty of excise and special duty of excise leviable under the schedule to the Central Excise Tariff Act, 1985 or as the case may be, the additional customs duty leviable under Customs Tariff Act, 1975 has already been paid and no credit under Rule 57A Rule 57B or 57Q of Central Excise Rules, 1944 has been availed in respect of the process dyeing, printing, bleaching or mercerizing in the manufacture of dyed, printed bleached or mercerized yarn. In this case, there is no dispute that RD have not availed the CENVAT Credit in respect of the inputs or capital goods. The only point of dispute is as to whether the grey acrylic spun yarn purchased by them from SBM which was dyed by them can be treated as the yarn on which the duty of excise under Schedule to the Central Excise Tariff Act, has been paid. According to the department since SBM have not discharged full duty liability in respec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and point of dispute was as to whether the inputs/raw material in these circumstances can be treated as the goods on which appropriate duty of excise had already been paid. This question was answered by the Apex Court in the negative observing that where the raw material is not liable to excise duty or such duty is nil, no excise duty is, as a matter of fact, has been paid upon it and to the goods made out of the such raw material, the notification will not comply. The judgment is an authority for the point of dispute it has decided and therefore, in our view, the Apex Courts judgment in the case of Shri Dhiren Chemical Industries cannot be treated as an authority about how the expression appropriate duty of excise under the said schedule has been paid is to be construed-whether it means payment of duty at the correct rate or whether it means payment of correct amount of duty, i.e., payment of duty not only at the correct rate but also on the correct value in case the rate of duty is ad-valorem. The expression appropriate duty means the applicable or the correct duty. The rate of duty on any the goods, as specified in the schedule to the Central Excise Tariff Act, 1985 rea....