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TMI Blog1985 (11) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... cotton fabrics as "rags" and cleared them without payment of duty during the period from 1-3-1970 to 31-5-1971 and that these goods were not bona fide rags but were sound fabrics deliberately cut mostly into 70 cm. long pieces (or blouse pieces) so as to conform to the size criterion laid down in exemption Notification No. 70/69-Central Excises, dated 1-3-1969. The aforesaid lower authorities reached the same conclusion in respect of further 71 bales (out of 105 bales seized on 13-1-1972 in the appellants' factory) of superfine cut pieces. The Collector demanded duty in respect of the goods, imposed penalties totalling Rs. 1.11 lakhs and confiscated the seized 71 bales, giving an option for their release on payment of a fine of Rs. 15,000/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry small quantity and the result of their inspection could not extend to the entire quantity cleared as rags, that the onus to show entitlement to the exemption was on the appellants which they had not discharged and that the Collector had already taken note of the appellants' plea of two possible interpretations and for that reason had not imposed the full penalty. 5. We have given our earnest consideration to the submissions made by both sides. To take up the question of interpretation first, let us notice the material portion of the entries in the Notification and the rule ;- "E-1. COTTON FABRICS 96A. Definitions. - In this section- (i) * * * * * &ems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notification itself contained a separate and detailed description in entry (viii) which was further amplified in the Explanation. We find that the definition of "rags" in rule 96A was materially different from the description (read with the Explanation) in the Notification. In the rule, cut pieces of 23-92 cm. length were, by virtue of the inclusive definition, deemed to be damaged or sub-standard cotton fabrics. In other words, length criterion was the only condition. But not so in the Notification. The Notification required fulfilment of two conditions-the prescribed length and the fact of the cut pieces being damaged or sub-standard (as amplified in the Explanation). If this were not so, the opening words of entry (viii) "Damaged or sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her net price realisation from "rags" as compared to fresh fabrics. The ultimate consumer of "rags" perhaps paid a lower price. All three-the appellants, their dealers and the final customers-benefited in the process but at the cost of the Exchequer which lost the duty of 90 paise per metre and which was split among the other three. The fact that there was deliberate cutting of fresh fabrics into rag sizes which were then cleared without payment of duty is proved further from the data marshalled by the Collector which shows that whereas during March-June 1969 (pre-self removal procedure period) the percentage of rags arising in the appellants' factory was 5-6%, it rose to as high as 80-85% during December 1970-March 1971. The appellants' ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluding portion of paragraph 6 of the Order-in-Original No. 7/MP/Cr/1973). The department has already given the benefit to 'D' rags. The dispute before us is in respect of the "other rags". We agree with the finding of the lower authorities and uphold the demand for duty as made by them. 10. At the same time, we find force in the appellants' plea so far as the fine and penalties are concerned. After concluding that the charge of clandestine removal on the part of the appellants was established, the Collector stated in the concluding paragraph of his two orders, almost in identical language : "The contravention is, no doubt, very serious but I cannot rule out the possibility that the mills might have misconstrued the scope of the Noti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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