Full Judgment
2. They were issued a Show cause notice for having conducting their manufacture of Terry Towelling Fabrics and Towels & export without following Central Excise law procedures and as also for the Terry Towelling Fabrics found in the premises confiscation liabilities were raised and for lack of proof of export of Terry Towel, duty demands were to be made and fine in lieu of confiscation of the goods was proposed to be determined & penalty liabilities arrived. In 1994 they obtain a registration under the Central Excise Law. The demands and confiscation and penalties were confiscated. Hence this appeal.
3. After hearing both sides and considering the submission made it is found- a) This is the second round before this Tribunal. The first order of this Tribunal dated 13.3.2001 remanded the matter back to the Commissioner for denovo adjudicating as per para 4 of that decision, which is reproduced below:- "It appears to us that the exemption that was granted from licensing to the respondent was itself incorrect. Rules 12 and 13 provide for export respectively finished product and of the goods used in the manufacture of the finished product. Export of these goods without payment of duty does not amount to an exemption to export under Rule 8 or later under Section 5A of the Act. The courts and the Tribunal have consistently been held the view that clearances under bond or under the claim for rebate of duty are not exempted clearances.
Apart from this, the Commissioner's order is sketchy and lacking in details. The respondent's claim is that the goods manufactured by it were exported by Yale Industrial Lubricants P. Ltd. The evidence of export of goods by the latter would be available in the form of shipping bills and other such documents. Evidence of supply of goods by the respondent to the firm at Mumbai would be available by way of lorry receipts, invoices etc. From these, it could easily be established, as to how much of the production of the respondent was actually exported, and how much not. Unfortunately the department's appeal, does not, so often, contain the details and copy of the chartered accountant's certificate and other documents as the Commissioner relies upon. The respondent also is absent and unrepresented despite notice. However, as we have noted, the Commissioner's order does not look into this aspect, which he ought to have done." The matter has been re-adjudicated and in the order now impugned before us, the Commissioner has not only disposed off the earlier Show cause notice issued but also two more Show cause notices dated 3.4.1995 & 28.8.1995 demanding duty on Terry Towelling Fabrics and Terry Towels.
b) The appellant have produced evidence of export of goods in the form of Shipping Bills and other relevant documents as also evidence of supply of goods from Nagpur to Mumbai, by way of Lorry Receipts, Invoices etc. to prove beyond doubt that the quantity of Terry Towels produced at Nagpur by the appellant was actually received in Mumbai and thereafter exported.
c) The appellant have filed from time to time declaration to Central Excise department, in one of the declaration they have also claimed benefit of notification 125/84 which granted exemption to 100% EOU. The plea of limitation for the demands in this case as made because, such declarations were filed cannot be accepted since in this case there is no doubt and contest about diversion of Terry Towelling Fabrics converted into Terry Towel by sale to Domestic Tariff area in India. We, therefore do not uphold the plea of bar of limitation.
d) The appellants have relied upon Board Circular and decision and trade notice as follows:- iv) CBEC instruction as per Cal II-62/GL-24/CE/CAC-II/89 dated 27.3.1989.
v) CBEC order 209/57/8-CX 6 dated 7.2.89 as reported at 1989 (41) ELT T-5 has also Tribunal decision in Kansal Knitwears (2001 (136) ELT 467) & Hindustan Lever Ltd (1999 (106) ELT 501).
Reading of the above gives support to the appellants stand that for the SS1 unit, which they are, it was not required to have obtain the Central Excise registration and Central Excise procedure were not required to be followed if they had exported 100% of the material Captively consumed. In the present case there is no cause to conclude that they have exported 100% of the production since the appellant fairly accepted the Terry Towelling Fabrics which is not covered under SSI exemption notification were converted into Terry Towel which were sold in Indian market. Duty on such Terry Towelling Fabrics is therefore required to be upheld. The appellants were also required to obtain Registration under Central Excise law and follow the procedure prescribed under Central Excise Rule. They had failed to do so. However, the plethora of instructions and the judgments relied will assist in reducing penal consequences.
e) Since the appellant were required to keep account of Terry Towelling Fabrics under the Central Excise Rules and they failed to do so and have removed such terry towel eventually without payment of duty into the domestic market, such Terry Towelling Fabrics would be liable to confiscation, this would not be a case of sample of non-accountal of goods within the registered factory premises. The confiscation of the Terry Towelling Fabrics arrived at is therefore to be upheld. However, the amount of redemption fine, which has been imposed, keeping in mind that the very large percentage hearing 100% of Terry Towel Fabrics eventually has been exported and on such goods duty was not required to be discharged under the Provision of then existing Rules and instructions. We would reduce the redemption fine and determine that Rs. 1,00,000/- would be sufficient in the facts of this case which would be required to be imposed, after upholding the confiscation of the goods.
f) Since the appellant had made declaration and have subsequently taken out the registration and also they have produced materials to evidence eventual export of the goods (terry towel) from India to USA & the duty liability is only to be restricted to a small quantity which they eventually cleared without payment of duty to domestic market in India. We would reduce the penalty imposed on the appellants under the Central Excise Rules to Rs. 5,000/- only.
g) In view of the finding as arrived at herein above, we would allow this appeal by ordering recovery of duty of the Terry Towelling Fabrics used in the terry towel sold in India as per Annexure L. The redemption fine reduce to Rs. 1,00,000/- and penalty reduce to 5,000/- has allow the appeal partially in above terms after upholding the exports.