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2016 (2) TMI 329 - CESTAT NEW DELHI

2016 (2) TMI 329 - CESTAT NEW DELHI - 2016 (344) E.L.T. 227 (Tri. - Del.) - 100% EOU - diversion of imported material - Revenue has concluded that the suppliers were engaged in diversion of imported goods without payment of duty and appellant also issued CT 3 certificate to the suppliers to procure goods without payment of duty which have been diverted to the open market on the instructions of the appellants by the supplier. Therefore, the appellants are liable to pay duty along with interest an .....

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se taken by the appellant is having evidentiary value over the evidence relied by the Revenue which are oral statements only. - in the absence of any corroborative evidence produced by the Revenue, the case of the Revenue is not sustainable. - Appellants have been able to prove that PFY/PTY is the raw material and they have procured these raw materials on the strength of CT 3 issued by appellant for procurement of the same, therefore, the duty cannot be demanded from the appellants. - Decide .....

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the impugned orders imposing penalty on him. 2. As the issue is common, therefore, all the appeals are disposed off by a common order. 3. The brief facts of the case are that M/s. RTL is a 100% EOU and was engaged in manufacturing of terry towels. M/s. Aryama Polyester Ltd. (in short APL) and M/s. Sarla Polyester Ltd. (SPL) are the manufacturer of polyester texturised yarn (PTY) and Polyester filament yarn (PFY). Both are 100% EOU. 3. An intelligence was received that some 100% EOU were diverti .....

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Certain documents were recovered and the statements of various persons were recorded. On the basis of these documents and statements, show cause notices were issued to M/s. RTL, M/s. APL and M/s. STL to recover Central Excise duty on diverted PTY/PFY jointly and severely along with interest and imposition of penalty and penalties on other co-noticees. It was also alleged that it was a well-planned conspiracy to defraud revenue by M/s. RTL, M/s. APL and M/s. STL. As M/s. RTL would get CT 3 certi .....

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d not use PTY/PFY in the manufacture of terry towel which was wholly manufactured out of cotton yarn and it was also alleged that they were not authorized to procure PTY/PFY. The show cause notices were adjudicated and duty was demanded from M/s. RTL along with interest and penalties were imposed on M/s. RTL, Shri Ravindra Garg and other co-noticees namely M/s. APL, M/s. SPL, Shri K K Jhunjhunwala, Managing Director of M/s. SPL, Shri Sushil Deora, Marketing Incharge of M/s. SPL, Shri Arun S Gupt .....

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ppellants were not able to defend their cases before the adjudicating authority in proper manner and hence they did not appear for hearing, therefore the impugned orders are in violation of principles of natural justice and pleaded that on this sole ground, the impugned orders are required to be set aside. He further submits that the appellants were manufacturers of 100% cotton terry towels and procuring PTY/ PFY for manufacturing of borders of terry towels as per the purchase orders. They were .....

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d thereafter, the same were entered in raw material register under the signature of Circle officer. The appellants have maintained all required records and filed RT 11 returns regularly. The appellants had submitted all the documents relating to the supply of PTY/PFY from M/s. APL and M/s, SPL. He further submits that the appellants had filed a detailed chart showing the export of 4,05,353.3 Kg. Towels with border and 25,821.070 Kg. towels without border. The required quantity of PTY/PFY receive .....

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1.9.1998. Records were resumed from the factory of the appellants but no discrepancy was found therein. At the time of visit of the factory of the appellants, 300 Kgs PFY was lying in the factory whereas the case of the Revenue is that appellant had never received used PTY /PFY to manufacture the cotton terry towel, Moreover, the case of the Revenue is that PTY /PFY is not even the raw material for the appellants to manufacture their final product. The case of the Revenue is based on oral submis .....

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ch documents were provided to the appellants and for the first time these documents were provided to the appellants on the direction of this Tribunal in the Court itself and copy of some of the documents are not still provided till date. If all the documents were provided to the appellants in that case, the appellants would like to cross examine all the witnesses whose statements have been relied upon for issuance of show cause notices. He further submits that appellants have been able to prove .....

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ed the PTY /PFY to manufacture the export goods. In these circumstances, he prayed that impugned order is to be set aside and appeals be allowed. In support of their contention, he relied on the decision of Arya Fibres Pvt. Ltd. vs. CCE, Ahmadabad II reported as [2014 (311) ELT 529 (Tri-Ahmd)]. He also relied on the following case laws:- 1. CCE, & ST vs. Nissan Thermoware P Ltd. [2011(266) ELT 45 (Guj)] 2. CCE, Thane II vs. Seven Seas Corporation [2010 (259) ELT 652 (Bom)] 3. Varun Dyes & .....

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llegation of the department is taken to be true in that case, the supplier has diverted the goods i.e. PTY/PFY to in Bhiwandi market as per the statements of the suppliers, in that case, the duty is to be demanded from the supplier only not from the appellant, as held by this Tribunal in the case of VVN Mfg. and Investors Ltd. vs. CCE, Vadodara [2007 (218) ELT 407 (Tri-Ahmd)]. 6. On the other hand, learned AR opposed the contentions of the learned Counsel and drew our attention to various submis .....

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payable on PTY/PFY by the supplier. He further submit that the export documents of the appellants show that they have exported 100% cotton towel which is clear from the documents produced by the appellants. In that sense, the appellants have no usage of these PTY/PFY, Therefore, PTY/PFY was not the inputs for the appellants. He further submits that border description of 100% cotton towel can be compulsorily interpreted as non-usage of PTY/PFY in case of said towel, for various purposes includin .....

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ation. He further submits that the material usage of, the material is required to be disclosed on the product and 100% cotton terry towel will compulsorily contain 100% cotton yarn. Therefore, he submits that the modus operandi of the supplier of the PTY/PFY to the appellant and the appellant was to divert the goods to various weavers in Bhiwandi under the guise of CT 3 certificate issued by the appellant stands proved. As such goods have been diverted by the appellants therefore, duty is demand .....

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ansferred under ARE 3 A against CT 3 from one EOU to another and the units purportedly receiving PTY were engaged in manufacture of 100 % cotton goods and use only cotton yarn for manufacture of goods but falsely showed consumption of PTY which means that appellants did not require POY / PTY as raw material in manufacture of export goods. 9. These allegations of the Revenue are based on various statements of supplier, transporters and the statement of persons on behalf of the appellants. On the .....

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at yarn in question i.e. PTY/PFY is an input for them to manufacture terry towel which have been used in manufacture of export goods which were ultimately exported which is not in dispute. In support of this contention, the case of the appellants is that during the course of investigation 300 Kgs. of PTY was physically found in their factory which took place after exportation of export goods was complete by the appellant and this export goods were containing PTY in borders of terry towels. To pr .....

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nwala has admitted in his statement dated 6.11.98 that the goods were delivered to M/s. Sukhsagar Roadlines on the instruction of appellants and goods were delivered at Bhiwandi. He also admits in his statement dated 22.9.99 that if the said yarn were sent to Bhiwadi instead of appellants factory, the supplier would offer ₹ 5 -6 in addition to actual price of yarn reflected in the invoice. As they were receiving extra money, therefore, he agreed to divert PTY / PFY to Bhiwandi. The transpo .....

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of RTL and the name of transporters were shown as M/s. Sukhsagar Roadlines., M/s. Standard Transport Corpn., M/s. Sainath Roadways, M/s. Vagheshwari Roadlines. The statement of transporter namely, M/s. Sukhsagar Roadlines, M/s. Standard Transport corpn. were recorded during the course of investigation. No statement of Vagheshwari Roadlines were recorded. But a statement of Satish Kumar Chowdhary, clerk of Balaji Salasar Roadways, Mumbai was recorded for the transporter namely, M/s. Sainath Road .....

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were initiated against the transporters. Therefore, reliance on the statement of the transporters creates doubts. The Revenue has also relied upon the statement of some of the employees of the appellants namely Shri Ravinder Garg, (one of the appellant), Shri H P Bharadwaj, Shri Jagbir Singh, Shri Sanjeev Khera, Shri Sushil Verma, Supervisor, Shri Kartar Singh, Inspector. We have seen statement of these people. Infact in the statement of Shri Ravinder Garg, it is admitted fact that they are usi .....

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impugned yarn was procured by the appellant during the period August, 1995 to April 1996 and the export also took place between the period 01.01.1995 to 31.5.1998. Therefore, the statement of employees of the appellant are exculpatory and support the case of the appellants. Revenue has not adduced any documentary evidence to show that the goods have not been received by the appellants and have been diverted by the appellants. 13. The defense of the appellant is that they have physically receive .....

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t PFY/PTY used by the appellants or found in their premises at the time of investigation were procured by the appellants from some other source except goods procured under CT 3 issued by the appellants. As Revenue failed to prove the source of procurement of PTY/PFY found during investigation and admittedly used in export consignments therefore, the evidence produced by the appellants that PTY/PFY is raw material for the appellants to manufacture the export goods is having weightage over the fac .....

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Sandhu Impex Ltd. vs. CCE Ludhiana [Final Order No. 52894-52895/2015 dated 14,9.2015 wherein the case was booked against the assessee on the basis of the statement of the managing director without bringing any corroborative evidence, in that case, this Tribunal held as under: "11. In this case also, we find that the case has been made out only on the basis of the statement of Shri Baldev Singh, Managing Director of the appellant and no other evidence in the form of to manufacture of such hu .....

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naging Director," 14. In this case also, the Revenue have relied on the assumptions that the PTY/PFY is not an input for the appellant to manufacture their final product which is found incorrect. 15. Therefore, in the absence of any corroborative evidence produced by the Revenue, the case of the Revenue is not sustainable, 16. In these circumstances, as appellants have been able to prove that PFY/PTY is the raw material and they have procured these raw materials on the strength of CT 3 issu .....

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