M/S Vrindavan Dyeing Mills (P) Ltd vs Commissioners Of Central Excise

Appeal No. : E/1286,1287/2011 ( Appln No E/MA(EXTN)/16205,16206/2014 E/ORS/10556/2015 )

[ Arising out of OIO-58/DEM/2010 dtd 31/03/2011 Passed by Commissioners of Central Excise, Customs and Service Tax-SURAT-I]

1. M/s Vrindavan Dyeing Mills (P) Ltd

2. Shri Shyam Sunder Dhanawat - Appellant(s)

Vs

Commissioners of Central Excise, Customs and Service Tax-SURAT-I - Respondent (s)

Represented by :

For Assessee : Shri J C Patel, Advocate Shri K I Vyas, Advocate For Revenue : Shri Alok Srivastava, Authorised Representative

For approval and signature :

Mr. P.K. Das, Hon'ble Member (Judicial) Mr. P.M. Saleem, Honble Member (Technical)

1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

No 3 Whether their Lordships wish to see the fair copy of the Order?

Seen 4 Whether Order is to be circulated to the Departmental authorities?

Yes

CORAM :

Mr. P.K. Das, Hon'ble Member (Judicial) Mr. P.M. Saleem, Honble Member (Technical)

Date of Hearing / Decision : 30/6/2015

ORDER No. A/11012-11013 / 2015 dtd 30/6/2015

Per : Mr.P.K. Das,

These appeals are arising out of a common order and therefore, both are taken up together for disposal. 2, The relevant facts of the case, in brief, are that the appellant No 1 was engaged in the manufacture of Processed Fabrics classifiable under Chapter 54 of the Central Excise Tariff Act 1985. They were availing Cenvat Credit under Cenvat Credit Rule 2002 and utilized the same for payment of duty of final product. The appellant received Grey Fabric from various merchant manufactures for processing on job charge basis and supplied them processed fabrics accompanied with proper document. A show cause notice dated 2.4.2008 was issued proposing to deny the cenvat credit alongwith interest and to impose penalty for the period May 2003 to October 2004 on the ground that during investigation in 2005 the supplier of the Grey fabric were found non-existence. By the impugned order, the Adjudicating authority confirmed the demand of cenvat credit alongwith interest and imposed penalty of equal amount of duty and also imposed penalty on Shri Shyam Sunder Dhanawat, Director of the appellant company. Hence, both the appellants filed appeals.

3. After hearing both the sides and on perusal of records, we find that the main contention of the Learned Advocate on behalf of the appellant is that the entire demand of duty for the period May 2003  October 2004 by show cause notice dtd 2.4.2008 is barred by limitation. He submits there is no material available of suppression of facts with intent to evade payment of duty by the appellant. He particularly drew the attention of the Bench the relevant portion of the statement of Shyam Sunder Bhanawat dtd 2.4.2008. He also drew the attention of the Bench to the letter dtd 4.12.2008 of the Dy Commissioner, Central Excise and Customs, Division IV, Surat I in reply to the query under RTI Act 2005 stating that the suppliers were in existence during the material period. He strongly relied upon the decision of Honble Gujarat High Court in the case of M/s Prayagraj Dyeing and Printing Mills Pvt Ltd vs Union of India [2013(290)ELT.61(Guj)]. The Learned Authorised Representative for Revenue reiterates the findings of the Adjudicating authority.

4. On perusal of the statement of Shri Shyam Sunder Dhanawat, Director of the Appellant Company, we find that he has stated that the goods were supplied by various merchant manufacturers for processing, on job charge basis and the goods were supplied to them accompanied with Central Excise invoice. They processed the goods and which were taken by the merchant manufacturers. He also stated that they received job charges for the processing of the grey fabrics. It is categorically stated that they received job charges by cheque from the various merchant manufacturers. It is seen that in 2005, the Central Excise Officers found that the suppliers of the Grey fabrics were not in existence. We find that the Dy Commissioner, C&CE Div IV, Surat by his letter dtd 4.12.2008 in response to query under RTI application had forwarded to copy of the CE Registration Certificate of the suppliers. Thus, it is clearly evident that the suppliers were in existence during he material period.

5. The Honble Gujarat High Court on the identical situation in the case of M/s Prayagraj Dyeing and Printing Mills Pvt Ltd (Supra) set aside demand alongwith interest as barred by limitation. The relevant portion of the said decision is reproduced below :

 12.?The next question is whether demand of reversal is barred by the period of limitation. In our opinion, in view of our above finding that if the original document is issued even by practising fraud, a holder in due course for valuable consideration unless shown to be a party to a fraud, cannot be proceeded with by taking aid of a larger period of limitation as indicated in Section 11A(1) of the Act. It is now settled law that Section 11A(1) is applicable when there is positive evasion of duty and mere failure to pay duty does not render larger period applicable. In the case before us, it is not the case of the Revenue that the transferees were party to any fraud and therefore, the Revenue cannot rely upon a larger period of limitation. Our aforesaid view finds support from the following decisions of the Supreme Court :

(i) CCE v. Chemphar Drugs & Liniments, reported in 1989 (40) E.L.T. 276.

(ii) Padmini Products v. Collector of Central Excise, reported in 1989 (43) E.L.T. 195.

(iii) Lubrichem Industries Limited v. CCE, Bombay, reported in 1994 (73) E.L.T. 257.

(iv) Nesle (India) Limited v. CCE, Chandigarh, reported in 2009 (235) E.L.T. 577.

13.?We thus find substance in the contention of Mr. Parikh that in the case before us, in the absence of any allegation that the appellants were parties to the fraud, the larger period of limitation cannot be applied, and thus, even if the original document was assumed to be issued by practising fraud, the appellants being holders in due course for valuable consideration without notice, the larger period of limitation cannot be extended in the case before us. In this connection, we may profitably refer to the decision of the Supreme Court in the case of Commissioner of Central Excise, Belapur v. E. Merck India Ltd. reported in 2009 (238) E.L.T. 386 (S.C.) where the Supreme Court took a view that in the absence of a willful misdeclaration on the part of the respondent-assessee, there was no scope of invoking Section 11A of the Act.

6. Respectfully following the decision of Honble Gujarat High Court in the case of M/s Prayagraj Dyeing and Printing Mills Pvt Ltd (Supra), we set aside the demand of duty alongwith interest and penalty as barred by limitation. The appeals filed by the appellants are allowed. The applications for extension of the stay order and the application for additional evidences are dismissed as infructuous.

(Dictated and pronounced in the Court)

(P.M. Saleem) (P.K. Das) Member (Technical) Member (Judicial)

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