Whether loosely assembled fiber web in roll form emerging at a stage before the exempted finished jute carpet, is marketable and therefore liable to excise duty

Whether loosely assembled fiber web in roll form emerging at a stage before the exempted finished jute carpet, is marketable and therefore liable to excise duty, without considering the relevant records and material submitted by the Appellants, is correct and sustainable in law?

Judgment and Facts of the case

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

CENTRAL EXCISE APPEAL NO.100 OF 2013

M/s Hitkari Hitech Fibres Pvt.Ltd.

Appellants

Versus

The Commissioner of Central Excise,

Raigad Commissionerate

Respondent

For Appellants- Mr V. Sridharan, Sr. Counsel with Mr Prakash Shah,

Mr Anil Galani and Mr Jas Sanghavi i/b M/s PDS Legal

For Respondent- Mr Vijay Kantharia with Mr Neelesh Kalantri

CORAM:

Hon’ble S.C. DHARMADHIKARI AND

Hon’ble B.P. COLABAWALLA JJ.

RESERVED ON: 13th JUNE, 2014.

PRONOUNCED ON: 24th JUNE, 2014.

ORAL JUDGMENT (PER B. P. Colabawalla J):-

1. Admit. By consent of parties, made returnable forthwith and heard finally.

This Appeal by the Assessee raises the following substantial question of law :-

“(A) Whether under the facts and circumstances of this case, the impugned order passed by the CESTAT, holding that the loosely assembled fibre web in roll form emerging at a stage before the exempted finished jute carpet, is marketable and therefore liable to duty, without considering the relevant records and material submitted by the Appellants, is correct and sustainable in law ?”

2. By this appeal filed under section 35G of the Central Excise Act 1944, the Appellant seeks to challenge the order dated 6th November 2012 passed by the Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as “the CESTAT”) confirming the order passed by the Respondent dated 28th November, 2011 that there was an emergence of excisable goods at the intermediate stage of manufacture of jute carpets that attracted a NIL rate of Excise Duty.

3. The brief facts giving rise to the present controversy are that the Appellant is a manufacturer of products falling under Chapters 56 and 57 of the Central Excise Tariff Act 1985. According to the Department, the Appellant had not paid Central Excise Duty on the intermediate product viz. “non-woven fabrics” (hereinafter referred to as the “impugned product”) falling under CETH 5603, used captively for manufacture of “jute carpets” which are cleared at 'Nil' rate of duty. It was the case of the Department that the Appellant was manufacturing the impugned product and using the same in the manufacture of “jute carpets” and “jute backed floor coverings”, assessable to 'nil' rate of duty. The impugned product used captively for the manufacture of jute carpets, according to the Department, attracted Excise Duty that was not being paid by the Appellant.

4. Accordingly, 15 show cause notices were issued to the Appellant for the period from October 1991 to October 2002 on the allegation that the impugned product that emerged as an intermediate product during the course of manufacture of jute carpets was a marketable product classifiable under Heading 56.03 and hence duty was leviable thereon inasmuch as the final product namely jute carpets, was exempt from payment of Excise Duty. The Appellant denied this allegation and maintained that the impugned product was neither marketed nor marketable. They claimed that the goods sold by them as “non-woven fabric” on payment of duty during the period of dispute were different from the impugned product referred to in the show cause notices. Accordingly, the Appellant contested the  demand of Excise Duty on the ground that the marketability of the impugned product in question, had not been established by the Department through positive evidence.

5. The show-cause notices were adjudicated by the Respondent vide his order in original No.69-83/Commr/Raigad/2003-04 dated 31st December 2003. Being aggrieved, the appellant filed an Appeal before the CESTAT who, by its order dated 28th April 2010 allowed the same and remanded the matter back to the Respondent for de novo consideration. On a de novo consideration, the Respondent by his order dated 28th November 2011 confirmed the demand in respect of 14 show-cause notices alongwith interest and also imposed a penalty on the Appellant. Being aggrieved by the said order, the Appellant preferred an Appeal to CESTAT who in turn inter alia held that the impugned product viz. “non-woven fabric” that emerged during the manufacture of jute carpets, was marketable and therefore liable to Excise Duty.

6. Mr Sridharan, the learned senior counsel appearing on behalf of the Appellant, submitted that the CESTAT had totally misdirected itself when it held that the impugned product (non-woven fabric) which was basically a loosely assembled fibre web in roll form, was marketable without considering the relevant records and material submitted by the Appellant. He further submitted that the CESTAT did not consider the entire evidence on record that was produced by the Appellant and in fact only took into consideration certain evidence whilst disregarding certain other vital evidence. In this regard, he pointed out that despite the fact that the CESTAT had relied upon paragraphs 7, 8, 12 and 13 of the affidavit of the Appellant’s General Manager, Shri Patwardhan dated 7th November 2008, the CESTAT overlooked and/or did not take into consideration paragraphs 9, 10, 11 and 14 wherein it was clearly stated that the impugned product was incapable of being marketed. Mr. Sridharan further submitted that the burden of proof that the impugned product is marketable in the very same form, is on the Department and the Department had not led any evidence in this regard and hence failed to discharge its burden. In this regard, the learned counsel placed reliance on a judgment of the Supreme Court in the case of Union of India v/s Delhi Cloth and General Mills Co.Ltd., reported in 1997 (92) ELT 315 (SC).

To read the full judgment, please find the attached file:

Attached file:

http://bombayhighcourt.nic.in/generatenewauth.php?auth=cGF0aD0uL2RhdGEvanVkZ2VtZW50cy8yMDE0LyZmbmFtZT1PU0NFWEExNTkxMy5wZGYmc21mbGFnPU4=