Asia Polytex (India) Limited Vs. Commissioner of Central Excise and - Court Judgment

Excerpt:
1. this appeal is against the order of the commissioner of central excise, surat, confirming the demand for duty issued to asia polytex (india) limited, the appellant before us, and imposing penalty on it.2. the notice issued to the appellant demanded duty on the yarn obtained by texturing partially oriented yarn. the notice, which was dated 1.11.1993, demanded duty on the clearances that were made of such yarn from 19.11.1991 to 21.2.1992. it invoked the extended period contained in the proviso under sub-section (1) of section 11a of the act on the ground that the manufacturer suppressed the fact of texturing.3. the counsel for the applicant contends that the department had been informed by the manufacturer of the texturing that it undertook, and further that the manufacturer was genuinely under the belief that it was entitled to the benefit under the notification 178/83. he cites before us a certificate dated 8.7.1991 issued by the jurisdictional superintendent. this certificate says that the appellant was engaged in the manufacture of crimped/texturised/twisted polyester yarn made for poy/pfy/nylon yarn and exempted from duty by notification 178/83 dated 1.7.1983. this certificate, it was explained, is issued in lieu of a licence which is required under rule 174, in cases where a person undertakes manufacture of goods which are exempted from duty. it would be clear from this certificate that the department was aware, even before the period for which the duty is demanded, that the manufacturer was engaged in texturing partially oriented yarn.4. notification 178/83 exempts from duty, subject to the conditions contained therein, textured yarn. the explanation to this notification provides that for the purpose of notification all stocks of filament yarn, other than textured, except such stocks thereof as are clearly recognisable as being non-duty paid, shall be deemed to be yarn of which appropriate excise duty or additional duty of customs has been paid. the benefit of the notification has been denied on the ground the it was hit by the contents of the first clause under the proviso the notification, which provides that the notification will not be available in cases where the yarn itself is exempted from excise duty or the additional duty of customs.5. the notice was issued on the ground that the partially oriented yarn which the appellant textured was imported free of duty under the deec scheme by madalsa international. however, it says under paragraph 7 that the yarn sold by the importer was purchased at the regular market i.e., inclusive of excise duty and processed and sold in the local market without payment of duty.6. from this, the contention of the counsel that the appellant was not aware that the yarn had been imported without payment of duty and therefore benefit of notification will not be available to it has to be accepted. since the price at which the appellant purchased the yarn was inclusive of excise duty, it would legitimately have concluded that appropriate duty was paid on the yarn. the absence of any intent to evade duty by wrongly claiming the notification is thus clearly evident.7. in theses facts, the extended period would not be available. the notice is therefore barred by limitation and the demand for duty and imposition of penalty cannot be sustained.

Judgment:
1. This appeal is against the order of the Commissioner of Central Excise, Surat, confirming the demand for duty issued to Asia Polytex (India) Limited, the appellant before us, and imposing penalty on it.

2. The notice issued to the appellant demanded duty on the yarn obtained by texturing partially oriented yarn. The notice, which was dated 1.11.1993, demanded duty on the clearances that were made of such yarn from 19.11.1991 to 21.2.1992. It invoked the extended period contained in the proviso under sub-section (1) of Section 11A of the Act on the ground that the manufacturer suppressed the fact of texturing.

3. The counsel for the applicant contends that the department had been informed by the manufacturer of the texturing that it undertook, and further that the manufacturer was genuinely under the belief that it was entitled to the benefit under the notification 178/83. He cites before us a certificate dated 8.7.1991 issued by the jurisdictional Superintendent. This certificate says that the appellant was engaged in the manufacture of crimped/texturised/twisted polyester yarn made for POY/PFY/Nylon yarn and exempted from duty by notification 178/83 dated 1.7.1983. This certificate, it was explained, is issued in lieu of a licence which is required under Rule 174, in cases where a person undertakes manufacture of goods which are exempted from duty. It would be clear from this certificate that the department was aware, even before the period for which the duty is demanded, that the manufacturer was engaged in texturing partially oriented yarn.

4. Notification 178/83 exempts from duty, subject to the conditions contained therein, textured yarn. The Explanation to this notification provides that for the purpose of notification all stocks of filament yarn, other than textured, except such stocks thereof as are clearly recognisable as being non-duty paid, shall be deemed to be yarn of which appropriate excise duty or additional duty of customs has been paid. The benefit of the notification has been denied on the ground the it was hit by the contents of the first clause under the proviso the notification, which provides that the notification will not be available in cases where the yarn itself is exempted from excise duty or the additional duty of customs.

5. The notice was issued on the ground that the partially oriented yarn which the appellant textured was imported free of duty under the DEEC scheme by Madalsa International. However, it says under paragraph 7 that the yarn sold by the importer was purchased at the regular market i.e., inclusive of excise duty and processed and sold in the local market without payment of duty.

6. From this, the contention of the counsel that the appellant was not aware that the yarn had been imported without payment of duty and therefore benefit of notification will not be available to it has to be accepted. Since the price at which the appellant purchased the yarn was inclusive of excise duty, it would legitimately have concluded that appropriate duty was paid on the yarn. The absence of any intent to evade duty by wrongly claiming the notification is thus clearly evident.

7. In theses facts, the extended period would not be available. The notice is therefore barred by limitation and the demand for duty and imposition of penalty cannot be sustained.