Full Judgment
2. The appellants carry on the business of texturising yarn at their factory situate at Silvassa. They imported during the relevant time 174019.900 kgs. of POY under DEEC Scheme. They also purchased 701216.206 kgs. of POY from the local market which is admittedly duty paid. They also textur-ised the yarns and exported 173885.640 kgs. of texturised yarn and sold locally 689681.465 kgs. of texturised yarn. It would appear that in respect of the goods sold locally by mistake, they have utilised imported POY referred to above and utilised locally purchased yarn for the purpose of goods which were exported. A show cause notice dated 22-2-1994 was issued charging the appellants inter alia that they "had twisted polyester filament yarn out of POY imported under DEEC Scheme without payment of import duty and CVD or on payment of import duty or out of indigenous POY purchased from open market." The show cause notice also referred to the statement of Karandikar made on 16-6-1992 whereunder he had stated to have accepted that they have exported the texturised yarn made out of duty paid indigenous yarn and for which no duty drawback was claimed. He has also stated that they were entitled to claim duty exemption under Notification 178/83 made out of DEEC materials. The show cause notice charged the assessee to pay the duty of Rs. 2,14,00,000/- approximately and also proposed to impose penalty for violations of various rules of the Central Excise Rules. It also proposed imposition of penalty on the other two appellants under Rule 209A. All the appellants replied to the show cause notice. The adjudicating authority by the impugned order at Paragraphs 28, 30 and 31 has held as follows :- "28. It is not an acceptable defence contention that since the notices have exported certain quantity of texturised yarn made out of duty paid indigenous POY without claiming drawback there is no loss of duty if they have cleared texturised yarn manufactured out of POY imported under DEEC scheme, in the local market without payment of duty. The export of texturised yarn without claiming drawback cannot permit the noticee to clear the texturised yarn, manufactured out of POY imported under DEEC scheme, for home consumption without payment of Central Excise duty in violation of the provisions of Notification No. 178/83-CE prevailing at the material time.
30. I have considered the noticees' contention and perused the CA's certificate. It is to be noted here that no evidence has been produced by the noticees either during the course of investigation or in their defence to show that the entire quantity of texturised yarn manufactured out of POY imported under DEEC scheme has been exported and that they have fully discharged the export obligation.
The details of import of POY/clearance of texturised yarn for home consumption and duty leviable thereon have been worked out on the basis of records/documents seized and data provided by the Director of M/s. Satidham himself. Moreover, as stated earlier, Shri Krishnakumar Jhunjhunwala, Director, in his statement dated 26-6-92 has specifically admitted that they had cleared the texturised yarn, other than the quantity of 18,792.690 kgs. exported, manufactured out of non-duty paid POY for home consumption in domestic market without payment of Central Excise duty. In view of these facts, the defence plea is not tenable.
31. It is evident from the declarations dated 6-2-90 and 2941-90 filed by M/s. Satidham with Superintendent, Central Excise, Silvassa and Vapi that they had claimed exemption from Central Excise licensing control on the basis of Notification No. 178/83-C.E. which provides exemption to texturised yarn falling under sub-heading No. 54.03 of Central Excise Tariff Act, 1985 only if manufactured out of duty paid POY falling under sub-heading No. 54.02 of Central Excise Tariff Act, 1985 only if manufactured out of duty paid POY falling under sub-heading No. 54.02 of Central Excise Tariff Act, 1985.
However, M/s. Satidham had manufactured texturised yarn out of non-duty paid imported POY and cleared such texturised yarn for home consumption without payment of Central Excise duty by availing exemption, under the said Notification. As such, M/s. Satidham filed a wrong declaration with the department stating that they were texturising the yarn out of duty paid POY whereas they were texturising yarn out of non-duty paid imported POY. Therefore, they have misdeclared and suppressed the material facts from the department and thereby evaded the payment of Central Excise duty on large scale to the tune of Rs. 2,14,75,784.44 Ps. In view of these facts, proviso to Section 11A(1) of Central Excises and Salt Act, 1944 is to be invoked in the instant case for recovery of duty evaded by M/s. Satidham as alleged in the show cause notice." 3. Learned Advocates S/Shri Prakash Shah and D.H. Mehta appeared for the appellants and Shri S.V. Parelkar, learned DR, appeared for the department.A. Total purchase of POY Local 701216.206 Imported 174019.900B. Home Consumption Out of local POY 534454.255 Out of import POY 155227.210C. Exports Out of local POY 155092.950 Out of import POY 18792.690D. Wastages 11669.001 Total 875236.106 5. This statement gives the total purchase of POY locally as well as imported and gives the quantity which has been exported which also includes wastages. The learned Counsel emphasises the fact that there has been a mistake in the usage of the locally purchased raw material in the exported finished goods and he also states that by mistake, the appellants have used the imported material in respect of finished goods which have been cleared for home consumption. He in fact shows a big statement mentioning about the imported material like polyester yarn which has been sent to Trendtex International Ltd., U.K., and it mentions port of export as Felixstowe and also mentions 115/POY Nanya.
The thrust of the argument of the learned Counsel is that invocation of the larger period of limitation and charging them "misstatement with an intention to evade duty" is uncalled for in this case. He says that there cannot be any gain which could be been made by the appellants. In fact he emphasises the fact that when Karandikar made the statement, he has accepted that they did not claim the drawback in respect of the exports. If there would have been intention to deny the Government of its legitimate dues, the assessee would have made its legitimate claim of drawback. Since there is no claim made on the drawback, the bona fides of the assessee and absence of any intention to make wrongful gain on the part of the assessee is existing in this case. The entire series of events would show, as emphasised by the counsel, that there has been only a mistake. He therefore states that the invocation of larger period is wrong in law. He also cites the decision of the Tribunal in the case of Harbans Lal Malhotra & Sons Ltd. v. CCK, Kolkata - 2002 (141) E.L.T. 521 (T) = 2002 (49) RLT 520 where under similar circumstances, the Tribunal has held that the invocation of larger period was not allowed.
6. As against this, learned DR would state that but for the advantage of the price in diverting the raw materials for the finished products, they would not have ventured in this type of transaction.
7. We have considered the rival submissions. The statement referred to in the earlier portion of the order would indicate that more or less the similar quantity used in the production of the final products which are used for home consumption as well as for export would show that there is no extra benefit accrued to the assessee regarding the duty element involved. Moreover in the order passed by the Tribunal in the Harbans Lal Malhotra & Sons Ltd. case, the claim is barred by limitation. It has been held in the said case that when the assessee could have claimed the benefit of Modvat, there would have been a revenue neutral situation in relation to the credit available to the assessee itself. Therefore there could not have been any intention to evade duty. In this case also if they would have utilised the locally purchased raw material for the purpose of production of the final product for home consumption, they would have had the proforma credit.
8. Nor are we able to accept the departmental representative's contentions. He was not able to explain what advantage in the price the assessee would have obtained by utilising the imported duty free material for clearance of texturised yarn or the local excise duty paid material for export of texturised yarn. He was not able to cite any specific example so as to stop the benefit of the assessee. Nor are we able to find existence of such advantage. Assuming it to be so (which is not proved) that there is difference in the price of yarn of the same denier depending upon whether it is manufactured in India or abroad, it is not possible to see how utilisation of one type of yarn towards the manufacture of the other (imported or local consumption vice versa) would give any benefit to the appellant. Therefore, if one variety of yarn which was superior to another, the buyer of that yarn would have paid the appellant the higher price than the buyer of the yarn which is not superior. Therefore whether the appellant exported or cleared for local consumption the imported yarn would not give it any advantage. There was therefore no motive in this regard to evade duty.
The impugned order in our opinion is wrong in law and hence set aside.