Full Judgment
but allowed redemption on payment of fine of Rs. 25 lakhs. He directed that interest of 20% to be paid in case of delay in payment of duty.
2. The appellants M/s. Special Prints Ltd. are engaged in processing of man made grey fabrics. The other appellants, namely M/s. Garden Silk Mills Ltd., M/s Vareli Textiles Ind. Ltd. and M/s. Surat Textiles Mills Ltd. were traders who entrusted the grey fabrics to M/s. Special Prints Ltd. for processing. The processed goods were generally supplied to the traders in lump form. The traders would cut and pack the process textile on their own before marketing. In certain cases M/s. Special Prints Ltd. itself undertake these processes for which an additional consideration was paid by the traders. The traders had filed requisite declaration in terms of Notification 305/77 for availing exemption from licensing control. Such activities of the appellants M/s. Special Prints Ltd. of processing of grey fabrics were taking place from 1985.
3. Show cause notices were issued to the traders as well as the processors. In the show cause notices it was alleged inter alia that the information relating to post manufacturing processes and the ultimate sale price charged by the traders was not furnished in the declaration. The data pertaining to the cost incurred by the traders where the activity of folding and cutting was undertaken by them, was collected. It was also alleged that the price shown for the lump form was substantially lower than the price of cut form in which the fabrics were actually sold by the trader. It was further alleged that the processes undertaken by the traders were identical with those of the processes undertaken by the processors. It was alleged that the manufacturing activity was split between them, viz. traders and processors which resulted in suppression of value of the fabrics for purpose of levy of duty. Based on these allegations two show cause notices were issued. The appellants filed their replies. After hearing the parties the Commissioner rejected their pleas and levied duties and imposed penalties as indicated in the earlier portion of the order.
Hence the present appeals.
4. It is contended by Shri J.F. Pochkhanawala, Senior Advocate along with Shri Somandy, Advocate, that the processes made by M/s. Special Prints Ltd. were only processing in the lump form cutting and therefore the assessable value was in lump form as approved. During the course of examination, it is argued, the concerned Superintendent admitted that he was fully aware that during the relevant time the appellants M/s.
Special Prints Ltd. were clearing cloth in lump form as in exhibit G.There was a litigation on this aspect of lump cloth with the department. It is therefore argued that the department having full knowledge of the same cannot invoke suppression and the appellants had suppressed nothing. Shri Pochkhanawala emphasizes the fact that the Commissioner has erred in ignoring these points mentioned in paras 35 to 38 of the impugned order dated 30.9.1997. Shri Pochkhanawala relied on the judgments of the Tribunal in various appeals. They were Rachana Art Printers v. CCE, Baroda, Appeal No. E/670/89, Final Order No.B/845/97, Kanodia & Co. v. CCE, Baroda, Appeal No. E/1197 & E/1129 and Order No. 1767/1768 whereunder in the similar circumstances the Tribunal at New Delhi had accepted the pleas of the assessee holding that the price at which supplier sold the grey cloths has no relevance for determination of assessable value for the goods cleared by the job workers. Shri Pochkhanawala also invited our attention to the judgment of the Tribunal in Motor Indus. Co. Ltd. and Ors. v. CCE, Bangalore 1999 (30) RLT 85 for the proposition that when the Tribunal has followed the judgment of the Supreme Court in the Ujagar Prints case the same judgment has to be followed in this case as well. In any event it is argued by the learned senior Counsel that in the judgment of the Delhi High Court in the case of Pioneer Silk Mills v. UOI it has been held that there cannot be any levy of penalty for violations of Additional Duties of Excise (Goods of Special Importance) Act that the government does not have right to levy penalty and confiscation of land on redemption fine. As against this the learned DR would adopt the reasoning of the lower authority.
5. We have considered the rival submissions. In our view the entire aspect of the matter is fully dealt with by the Tribunal in the cases mentioned above, viz. Rachana Art Prints as well as Kanodia & Co.
Appeal E/670/89/D & Appeal 1127/ 90-A. In both these cases the Tribunal has allowed the appeal of the appellants. It has been held in Rachana Art Prints case that it is settled position that the processor has to pay duty only at job charges inclusive of raw material and job work to net profit of supplier of raw material. Curiously enough the Commissioner quotes the judgment of the Supreme Court in Ujagar Prints 1989 (39) ELT 493 at para 109. He erred in not following the ratio of the judgment. We are therefore of the view that there cannot be any claim for duty from the processors. There cannot be any levy of penalty in view of the Delhi High Court judgment in Pioneer Silk Mills (supra).
Moreover, having known the nature of the transactions, the department cannot invoke larger period of limitation as is revealed in Exhibit G where the Superintendent during the course of examination was fully aware of the nature during the relevant time. We are of the view that appeals filed by the appellants deserve to be allowed and they are allowed after setting aside the impugned orders. In any event levy of interest does not arise.