Commissioner of Central Excise vs Amarnani Textiles Ind. Pvt. Ltd.

This appeal of the Revenue is challenging the order passed on 9th July, 2004 by the Customs, Excise and Service Tax Appellate Tribunal, West Zone, Bench at Mumbai (for short "the Tribunal") [2005 (179) E.L.T. 506 (Tribunal)]. The respondent/assessee had approached the Tribunal being aggrieved and dissatisfied with the Order-in-Original dated 30th June, 1997 passed by the Commissioner of Central Excise, Mumbai-III.

Mr. Rao, appearing on behalf of the Revenue would submit that the substantial question of law which has been framed by this Court at the time of admission of this appeal ought to be answered in favour of the revenue and against the assessee. For that purpose he submits that the show cause notice levelled specific allegations. If that show cause notice is read in its entirety and together with the statement of facts as emerging from Annexure "A" thereof, then, the Tribunal should have been aware that the foundation on which the said notice was issued fell clearly within the relevant legal provision. That relevant legal provision (Section 11A of the Central Excise Act, 1944) enables the revenue to recover the duty and if it is either short levied or erroneously levied within one year and if the reason for this short levy or erroneous levy is either a fraud or collusion or willful misstatement or suppression or contravention of the provisions of the Act and the Rules, then, the extended period of five years could have been invoked and applied.

Mr. Rao submits that the Tribunal completely omitted from consideration the allegations in the show cause notice founded on willful misstatement of facts or suppression by the assessee. If the ingredients are thus made out and there was cogent satisfactory material based on which the adjudicating authority rendered its findings at pages 54, 55 and 64 of the paper book, then such findings of fact should not have been interfered with by the Tribunal. As a last fact finding authority the Tribunal was obliged to consider as to whether the adjudicating authority was in error in arriving at the conclusion that it reached. Further the conclusion was suffering from perversity or serious legal infirmities as would require interference by the Tribunal. The Tribunal has simply gone by the fact that the assessee took a particular stand and which stand was known to the Department/Revenue. A general finding of fact is then rendered by the Tribunal and it held that there is no suppression. Therefore, the extended period could not have been invoked. This finding of the Tribunal is vitiated according to Shri Rao and by error apparent on the face of the record.

On the other hand, Mr. Shroff, learned Senior Counsel appearing on behalf of the assessee supports these findings and particularly recorded at pages 107 and 108 of the paper book. He submits that there is no substantial question of law. Inasmuch as these findings are in consonance with the factual materials placed before the authority by the Revenue itself. If on the material which the Revenue relies upon a suppression could not be established and proved, then, the extended period of limitation was unavailable. This finding of fact by the Tribunal cannot be termed as perverse. The finding was possible and in the given facts and circumstances. Therefore, the appeal should be dismissed.

We have with the assistance of the Counsel appearing for parties perused the appeal paper book and the relevant Annexures including the impugned orders. On 27th August, 1996 the show cause notice was issued. It was addressed to M/s. Amarnani Textile Industries Pvt. Ltd. (conductors of M/s. Shiva Suitings Ltd.), M/s. Amarnani Textile Industries Pvt. Ltd. Kandivali Mumbai, Mr. Raju Narayan Das, Amar Nani, Managing Director of M/s. Amarnani Textiles.

M/s. Amarnani, Kandivli, Mumbai was supposed to be the conductors of M/s. Shiva Suitings and Shiva Suitings was located at Dombivli District Thane. M/s. Shiva Suitings were engaged in the business of job work according to the Revenue. The assessee in this case M/s. Amarnani Textiles Industries Pvt. Ltd. was producing man made fabrics i.e. suitings. At the relevant time and as detailed in the annexure to the show cause notice the three noticees with mala fide intention to evade payment of central excise duty, processed and removed man-made fabrics having width of 147 centimeters totally ad measuring 23,40,11.80 sq. meters on their own account from the factory and cleared the same to Kandivli by misdeclaring and willfully suppressing the actual sale values of the fabrics while filing the price lists with the Central Excise Department. The period covered was June, 1993 to March, 1994. In short, the fabrics were processed at Dombivli, District Thane and cleared to Kandivli as if they had been received by a distinct job worker based at Dombivli. The investigations carried out and the statements recorded revealed that the said Amarnani had cleared their own cloth from Dombivli and passed it off as if received at the Unit at Dombivli by the said Amarnani in their capacity as conductors. Meaning thereby this was not a job work carried out by Amarnani for any distinct third party at Dombivli, District Thane. The investigations have been referred in great details in the annexure to the show cause notice. We have carefully perused these allegations, the basis and the foundation of the show cause notice.

While the order-in-original was delivered the Adjudicating Authority referred to the facts, in brief, the charges in the show cause notice and equally the defence/reply of the assessee.

The assessee''s stand was that none of the activities and carried out at the premises at Kandivli and Dombivli were ever suppressed. They are within the knowledge of the Department. With effect from April, 1993 one M/s. Shiva Suitings Limited gave their premises and their job work assignment on contract basis to M/s. Amarnani. The activity of processing of grey fabrics was thus undertaken by the contractor on behalf of M/s. Shiva Suitings. The activity of processing of grey fabrics for third party manufacturer as also the grey fabrics received from Kandivali factory or Unit of M/s. Amarnani were disclosed with the details including price lists in Proforma-I. In the remarks column the name of Amarnani Textiles Industries Pvt. Ltd. was mentioned to show that the grey fabrics belong to the said Amarnani. In the price list they were indicating cost of grey fabrics and added to that the job work charges including profit plus a 10% notional amount to take care of unforeseen costs and expenses like shrinkages etc. Thus, the assessee was following a procedure for determination of the assessable value and according to it which was laid down in the decision of the Hon''ble Supreme Court delivered in the case of M/s. Ujagar Prints v. Union of India - 1989 (39) Excise Law Times 493. The assessee claimed that the price lists were duly approved. There is no suppression much less mis-declaration, more so, because case records were also audited by the Department and even the Audit Department did not raise any objection. The show cause notice issued to the assessee alleging shrinkages has also been referred to and the voluntary payments in respect of certain charges and allegations under a distinct show cause notice. The defence was that had there been any suppression the Department would not have obtained all the details and for issuance of any show cause notices relating to shrinkages. The activities were never termed as clandestine or not to the knowledge of the Department or revenue.

Yet, the Adjudicating Authority relying upon the allegations in the show cause notice concluded that the reliance placed by the assessee on M/s. Ujagar Prints was misplaced. How that judgment applied and to a distinct case is discussed by the adjudicating authority. The adjudicating authority refers to the fact that M/s. Amarnani Textile Industries Pvt. Ltd., Kandivli, Mumbai are manufacturer of grey fabrics. They had taken on lease the processing unit of M/s. Shiva Suitings Ltd. situated and located at Dombivli, District Thane. As per the agreement they conducted the activities undertaken by M/s. Shiva Suitings Ltd. He also refers to the fact that in their capacity as manufacturer of grey fabrics M/s. Amarnani were sending the same to the Dombivli Unit for processing. If this was the factual position and the recorded in the conclusions of the Adjudicating Authority, then, it was incumbent upon it to have concluded and further as to regarding which part of the activities the assessee is suppressing the facts and relevant for the purpose of assessment and recovery of excise duty. The finding was till the sale of fabrics to their wholesale dealer/final customer, the ownership of the fabrics remained with M/s. Amarnani Textiles Industries Pvt. Ltd. Even at the time of processing the ownership remained and in relation to some of the grey fabrics manufactured by M/s. Amarnani at Kandivali. If both the Units were belonging to the same party the dealings cannot be determined at arms length. The adjudicating authority thus misdirected itself and in law. It was required to adjudicate the show cause notice with the aforesaid allegations. It was, therefore, incumbent upon it to hold that the charges and allegations in the show cause notice of mis-declaration and suppression are established and proved by the Revenue. Rather than doing that the adjudicating authority decided as to how the duty can be assessed and in what manner the features in the assessee''s case would enable it to distinguish the judgment of the Hon''ble Supreme Court. That exercise was thus impermissible. If this is, how the adjudicating authority proceeded then the Tribunal was obliged to step in. It stepped all by referring to the records. In paragraph 2 of its order the point falling for determination in the appeal has been formulated. The precise point was whether the demand raised in the show cause cum demand notice is barred by limitation. In that regard the Tribunal found that whenever grey fabrics were received for processing from Kandivli Unit of assessee the price lists were filed. The name of the assessee as owner of manufacturer of grey fabrics was indicated in the remarks column. The grey fabrics received from third party at Dombivli unit for processing were indicated in the price list in that behalf in the similar column. Further, the assessee never suppressed that it adopted a certain method of valuation and the formula emerging from the judgment of the Supreme Court in Ujagar Prints (supra). That method or formula may have been incorrect or not the applicable one, but the revenue proceeded to approve the price list. The revenue had several options and remedies so also courses open in law and precisely under the Central Excise Act, 1944. The Tribunal indicates as to how the Revenue could have insisted on the revision of the price list if the Ujagar formula was inapplicable. If details were called upon to be furnished by the assessee the assessee replied to the letters and communications but did not give up its stand referred above, then, from this material neither mis-declaration nor suppression could have been inferred. All the more, when the records of the assessee were produced. There were audits. The objection raised by the audit and with regard to method of valuation also resulted in a show cause notice limited to two issues, namely, value of shrinkages not included in the assessable value and the non-addition of 2 to 10% of notional amount in the assessable value. If this was the course adopted by the Revenue while scrutinizing and verifying the records and for purpose of assessment, then, the Tribunal rightly concluded that nothing prevented the Revenue from questioning the stand of the assessee. If the Ujagar formula was inapplicable or was misapplied to the given facts and circumstances, then, the revenue could have proceeded and in accordance with law. If it has omitted to do it, then, it cannot turn around and allege suppression or mis-declaration on the part of the assessee. This is a finding of fact emerging from the materials produced on record. If the allegations in the show cause notice are held as not established or proved, then, we do not see how such conclusion can be inferred by us. We cannot term it as perverse or vitiated by any error or law apparent on the face of the record. The adjudication by the Tribunal in the appeal is within the four corners of Section 11A and the ingredients thereof required to be established by the Revenue. This is how it proceeded and held in favour of the assessee, then, the order in that behalf cannot be held to be vitiated and to such an extent as would enable us to answer the substantial question of law in favour of the Revenue. Hence, answering it in favour of the assessee we proceed to dismiss the appeal. No order as to costs.