TaxTMI 
TaxTMI 
2018 (7) TMI 762
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....sioner (Appeals) upheld the same. The appellants have filed the present appeal challenging the said order passed by Commissioner (Appeals). This appeal was earlier disposed by the Tribunal, vide F.O.No.40386/2017 dt.1/3/2017. The appellant filed appeal against the said Final Order before the Hon'ble High Court and vide judgment dt.8/11/2017, the Hon'ble High Court remanded the matter for fresh consideration. Hence the appellants are once again before this Forum. 2. On behalf of the appellants, the Ld.Counsel Sh.C.Saravanan appeared and argued the matter. His submissions can be summarized as under : (i) The main evidence relied by Revenue for confirming the demand are the statements recorded from the buyers of yarn from the appellant. The statements of the following customers/buyers were obtained. SL. NO. DATE STATEMENT OBTAINED FROM RELATION WITH NSM ANNEXURE NUMBER IN THE SCN 1 10.07.2003 C.Saravanan, Director of Peeyelcee Tex Export (P) Limited Customer C-14 2 10.07.2003 L.Sivasankar Narayanan, Partner of Peeyelyes International and Sansons Exports Customer C-16 3 10.07.2003 J.Lakshmanan, MD of JaisarSpintex (P) Limited Customer C-27 4 22.01.2004 ....
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....uty to customers as under the notification. (vi) The case of the appellant that yarn was send for conversion was not accepted by the department stating that it is not corroborated by evidence. In fact, the appellant has been availing the procedure of Rule 96E of Central Excise Rules for conversion of yarn to hank yarn through job workers. The procedure was done as per Rules under acknowledgment of Excise authorities. While complying such procedure documents pass through the excise authorities. Such documents relating to conversion activities undertaken during the disputed period were not found to have any discrepancy calling for any action. The records maintained by appellant reflected the actual conversion figures and procedures undergone, and no offending goods of the appellant were seized at anytime during the period or thereafter. The department has no case that the appellants have not maintained proper yarn conversion register, conversion documents, AR3A, DC, D3s, declarations filed under Rule 173B of Central Excise Rules etc, That when there is no dispute with regard to these documents relating to conversion of yarn into hank, the allegation of the department that appellant ....
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....ns on the strength of Form AR-3A for conversion into hank yarn and thereafter cleared the same on the strength of Central Excise Invoices and maintained proper records. Therefore, no clandestine clearance is made out. In para 74 of OIO, the adjudicating authority had observed that there is no case against appellant for removal of excisable goods without accounting and/or payment of duty. (xi) The authorities below failed to note that the customers of appellant were engaged in manufacture of Terry Towel. It was necessary for them to procure grey hanks from persons like appellant for dyeing purpose and thereafter got it rewound for use in their power loom. In para 81 of OIO, the adjudicating authority has gone on an ipsi dixit that the buyers did not require hanks as they were using power loom. He failed to understand that even power loom required dyed yarn for cheaper materials like Hand Towels and for these only hanks were used by such manufacturers. The power loom technology that was prevalent and available during the period did not allow dying of yarn in the power loom. Therefore even manufacturer using power loom would buy hank yarn and get it dyed and thereafter get it wound t....
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....chased hank yarn from appellant. On the request of appellant, summons was issued to these customers for cross-examination. Three of them failed to appear. Their statements are fully reliable. The job worker/convertors have also stated that they did not undertake any work of conversion for appellant, but prepared bogus documents to show that hank yarns were cleared. Their retraction in cross-examination is an afterthought. 3.1 The partner of M/s. M/s.Peeyelyes Interntional, Sh. L.Sivasankar has given statement on 10.7.2003 to the effect that the main raw material for manufacture of terry towel is 10s and 16s cotton yarn on cheese/cone and only negligible quantity, i.e., around 1% of total purchase constitute 2/20s hank yarn which is used for stripes/border on the terry towels. They manufacture terry towels in power looms and not handlooms. If hank has to be used it has to be converted to cheese yarn which increases the cost of yarn and therefore they purchased and used only cheese yarn. It is categorically stated that they have not purchased hank yarn from appellants. Similar statement is given by other buyers of yarn. 3.2 As the appellants were removing yarn for conversion to the....
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....arn after conversion. On the scrutiny of evidence placed before us we are able to see that the series of documents relating to the conversion activity including D3 (issued by Range Officer certifying that hank yarn has been received after conversion) has been rejected by the department on the basis of letter given by the Range Officer that though D3 intimations were given by him, he had not conducted verification physically whether such goods were received back after conversion. 5.2 For better appreciation the relevant law of Central Excise Rules, 1944 is reproduced as under: RULE 96E: Procedure for removal of cotton yarn or [jute twist, yarn, thread, ropes and twine] from one factory to another without payment of duty. - (1) Cotton yarn or [jute twist, yarn, thread, ropes and twine] may be removed without payment of duty from one factory to another for the purpose of processing or packing or for the purpose of manufacture of cotton fabrics or jute manufactures subject to the observance of the procedure hereinafter prescribed (4) If cotton yarn, after being processed, is removed without payment of duty to one or more factories for the purpose of further processing, or to the ....
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....pon a written demand being made by the former officer, pay the duty leviable on such goods within ten days of the notice of demand and if the duty is not so paid he shall not be permitted to make fresh removals of any warehoused goods from one warehouse to another until the duty is paid or until the triplicate application is so presented or the duplicate application is so received. (2) Where such duty has been paid, it shall be refunded to the consignor either on his presentation of the triplicate application to or on the receipt of the duplicate application by the officer at the warehouse of removal, duly endorsed, as provided in sub-rule (3) of rule 156A, with a certificate by the officer-in-charge of the warehouse of destination that the goods covered by the application have been satisfactorily rewarehoused. 5.3 Thus, it can be seen that the procedure contemplated for removal for the purpose of conversion is self contained. The consequence of not adhering to the procedure is laid down in 156 B. The department has no case that any action was taken against appellant for not complying the procedure. To get the yarn converted into hank the appellant dispatches the dutiable chee....
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....as been disregarded in toto. These evidences including the ARA-3s and D3s indicate the strong probability that appellant has send yarn for conversion. 5.5 The main evidence relied is the statement of buyers of yarn from the appellant. The Partner/director of M/s. Peeyelyes International and Sansons Exports, M/s.JaisarSpintex (P) Limited, M/s. Peeyelcee Tex Exports (P) Limited and M/s. Anitha Traders had stated that they purchased only cone/cheese yarn and that they use only minimum quantity of hank yarn etc. Out of these Sh.A.Chandrasekar, Partner of Anitha Traders has stated in cross examination that they purchased hank yarn from appellant. Surprisingly, although documents recovered from Sh. Muthu Industries (sizing Mill run by and for Peeyelyes International) was heavily used by department for investigation as well as to base the allegations in the SCN, it is seen that no statement was obtained from any person connected with M/s.Muthu Industries. The counsel for appellant has strongly argued that the statements made by Sh.L.Sivasankar Narayanan (Partner of Peeyelyes International and Sansons Exports), Sh.J.Lakshmanan (JaisarSpintex (P) Limited & M/s.Peeyejay Fabrics) and that of....