TMI Blog2006 (8) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... al officers to their premises that the Mills admitted having removed dutiable goods without payment of duty. Suppression of material fact with intent to evade payment of duty is evident in this case. Thus, we held that the extended period of limitation was rightly invoked in this case for demanding duty from the Mills in respect of the processed powerloom fabrics supplied to Co-optex during the period of dispute. The appeal of the Mills contains a claim for abatement of duty on the ground of closure of some of their stenters. This is a claim under Compounded Levy Scheme. Now that the appellants themselves have repudiated the scheme and have chosen to follow Section 3 of the Central Excise Act in respect of the goods processed and cleared by them during the compounded levy period, this claim for abatement of duty is untenable. The Mills have also claimed the benefit of Section 4(4)(d)(ii) of the Act. This claim is admissible to them in terms of the Supreme Court s decision in Commissioner v. Maruti Udyog Ltd.[ 2002 (2) TMI 101 - SUPREME COURT] . The Commissioner has to re-quantify the demand of duty on this basis. As we have found against the Mills suppression of facts with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Compounded Levy Scheme in terms of Section 3A of the Act. While the demand of duty for the period up to 15-12-98 is challenged only on the ground of limitation, the demand of duty as compounded levy is challenged both on merits and on limitation. The invocation of extended period of limitation for the entire demand has been questioned by the Mills on the ground that they had no intention to evade payment of duty. On the same ground, they have also challenged the penalty imposed on them under Section 11AC. Co-optex have challenged, the imposition of penalty on them by pleading that they did not abet commission of any offence by the Mills. 2. The Mills were engaged in the processing (bleaching, dyeing, printing, stentering etc.) of woven fabrics of cotton and man-made yarns with the aid of power. The raw material (grey fabrics) to be so processed on job work basis was supplied by agencies such as the Tamil Nadu Handloom Weavers Co-op. Society Ltd. (Co-optex), the Tamil Nadu Khadi Village Industries Board, the Karnataka Handloom Development Corporation, the Kerala State Handloom Development Corporation etc. These agencies used to procure grey fabrics from handloom weavers and supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very challans (IETs) under which such fabrics were despatched to them by Co-optex did not specify the goods as handloom fabrics (iii) as handloom and powerloom woven fabrics looked alike, it was not possible for them to distinguish one from the other and (iv) they processed the powerloom fabrics, thinking that the same was handloom fabrics. On this basis, it is contended that the Mills had no intention to evade payment of duty while clearing the processed powerloom fabrics to Co-optex. Ld. consultant has argued that, as the Mills, during the material period, were not aware of the fact that the grey fabrics received from Co-optex and processed by them (Mills) were powerloom fabrics, they cannot be held to have suppressed anything before the Department with intent to evade payment of duty. The extended period of limitation was not invocable on the ground of a mere lapse found by the Commissioner. It has been argued that the burden to show that the Mills had intent to evade payment of duty was on the Department, but the same was not discharged in this case. In this connection, learned consultant has relied on the following decisions : 1) Collector v. Chemphar Drugs Liniments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them that the Mills disclosed these facts. The Mills had suppressed the facts with intent to evade payment of duty and, therefore, the extended period of limitation has been rightly invoked to demand the duty from them. Learned SDR has also endeavoured to distinguish the facts of the instant case from those of Padmini Products (supra) and Tamil Nadu Housing Board (supra). She has also relied on the apex court s judgment in TNHB case, to argue that, once the initial burden of showing suppression of facts by the party was discharged by the Department, the burden shifted to the party, whose liability it was to show that they had no intention to evade payment of duty. In the present case, according to learned SDR, the Mills did not discharge this burden successfully. The Mills had wrongly availed exemption in respect of processed powerloom fabrics by not disclosing the relevant facts to the Department and, therefore, the extended period of limitation was invocable against them as held by the Tribunal in the case of Bharat Earth Movers Ltd. v. Collector, 2001 (136) E.L.T. 225 (Tri.-Bang.). Referring to the contention of the Mills that all relevant details of the processed fabrics were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etter, the Mills requested M/s. Tamil Nadu Textile Corporation to take back their grey powerloom fabrics lying in the mill as they (the Mills) had decided to process only handloom fabrics from 16-12-98 onwards. This would also go to show that the Mills were able to identify grey powerloom fabrics from grey handloom fabrics. Shri N. Bhaskaran, who was Production Supervisor of Co-optex during 1989 to 1995, in his statements given to the investigating officers of the Department, confirmed that the difference between powerloom fabrics and handloom fabrics was visible at grey stage. In 1999, after Compounded Levy Scheme was introduced, the Mills gave an undertaking to the Commissioner that they had stopped processing powerloom fabrics. Such an undertaking made it obligatory for them not to process powerloom fabrics as a condition for exemption from Compounded Levy Scheme. Therefore, during the compounded levy period, it was incumbent on the Mills to ensure that they did not accept any grey powerloom fabric from the raw material-suppliers including Co-optex. It has been contended that the identity of grey fabrics supplied by Co-optex had not been specified in the delivery challans issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is thus evident that, when the Mills were removing the subject goods (processed powerloom fabrics) without payment of duty, they were aware of the fact that they were removing dutiable goods. They were so doing apparently with intent to evade payment of duty. 7. In his endeavour to show that the above removals of dutiable goods without payment of duty were occasioned by lapses on the part of Co-optex, learned Consultant referred to Notification No. 27/92-C.E. (N.T.), dated 9-10-92, which reads as under :- In exercise of the powers conferred by sub-rule (2) of rule 174 of the Central Excise Rules, 1944, the Central Board of Excise and Customs, hereby exempts from the operation of rule 174 of the said rules every manufacturer who gets his goods manufactured on his account from any other person subject to the conditions that the manufacturer authorizes the person, who actually manufactures or fabricates the said goods to comply with all procedural formalities under the Central Excises and Salt Act, 1944 (1) of 1944) and the rules made thereunder in respect of the goods manufactured on behalf of the said manufacturer and, in order to enable the determination of value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of duty is evident in this case. 9. We have considered the decisions cited before us. In the case of Padmini Products (supra), it was held that, where there was scope for doubt as to whether the goods were dutiable or not, the extended period of limitation under the proviso to Section 11A(1) would not get attracted. In the present case, there was no scope for the Mills to doubt whether grey fabrics processed by them were handloom fabrics or powerloom fabrics. In TNHB s case, it was held that the assessee must be aware that duty was leviable and must be found to have deliberately avoided paying duty so that the extended period of limitation could be invoked for demanding the duty from them. This condition, in our view, stands satisfied in the present case. In the case of Chemphar Drugs Liniments (supra), it was held that conscious or deliberate withholding of information by manufacturer was necessary to invoke the larger period of limitation. The facts and circumstances of the present case, which have already spelt out, indicate that the Mills deliberately suppressed material facts before the Department. In the relevant invoices, they declared the goods as handloom fabrics ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Compounded Levy Scheme. Now that the appellants themselves have repudiated the scheme and have chosen to follow Section 3 of the Central Excise Act in respect of the goods processed and cleared by them during the compounded levy period, this claim for abatement of duty is untenable. The Mills have also claimed the benefit of Section 4(4)(d)(ii) of the Act. This claim is admissible to them in terms of the Supreme Court s decision in Commissioner v. Maruti Udyog Ltd., 2002 (141) E.L.T. 3 (S.C.). The Commissioner has to re-quantify the demand of duty on this basis. As we have found against the Mills suppression of facts with intent to evade duty, interest on duty is leviable under Section 11AB of the Act as held by the Commissioner. For the same reason, penalty is imposable on the Mills under Section 11AC of the Act. But we do not think that an amount equal to duty should compulsorily be imposed under this provision in the facts and circumstances of this case. It is settled law that the quantum of penalty prescribed under Section 11AC is the maximum and it is open to the adjudicating authority, in proper exercise of his discretion, to impose a lesser penalty, having regard to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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