Commissioner of Central Excise vs Kaushal Silk Mills Pvt. Ltd.

The Revenue has approached this Court being aggrieved by the order passed by learned CESTAT, Mumbai dated 1st May, 2013, thereby directing the adjudicating authority to quantify the demands for the month of December, 2002 by disallowance of deemed credit which is limited to actual extent of inflation in the value of grey fabric cleared for export under bond raised by the demands against processors, however, setting aside the rest of the duty demand and also setting aside penalties on the processors as well as on M/s. Global Overseas, M/s. Pristine Exports and Shri Ashok Ketan. It is the case of the Revenue that the merchant exporters suppressed the actual value of grey fabrics supplied to the processors by producing fake bills and by not supplying actual purchase bills of the suppliers of grey fabrics and as such declared the value on their own with an intent to overvalue processed fabrics to facilitate excess availment of deemed credit by the processors.

The case against the processors is that although they have undertaken to follow the correct procedure on behalf of the merchant manufacturers and though they are responsible for keeping correct account for goods received and dispatched on their behalf by correctly assessing the details, they did not take any care in preparing the price declarations on the basis of genuine purchase bills of grey fabrics and they were aware at each and every stage that the merchant exporters were supplying bills of persons/units other than actual supplier of grey fabrics to their unit for processing, resulting in higher assessable value being declared in contravention of the provisions of Section 4 of the Central Excise Act, 1944 read with Rule 6 of the Valuation Rules, 2000 leading to undue availment of excess deemed credit in contravention of the provisions of Rule 11 of the Cenvat Credit Rules, 2004 and para 6 of Notification No. 6/2002-C.E. (N.T.), dated 1-3-2002.

The demand made against the duties and penalties came to be confirmed by the Order-in-Original passed by the Commissioner, Central Excise dated 30th December, 2005. Being aggrieved thereby, an appeal came to be filed by the petitioner. The learned Tribunal partly allowed the appeal. Though the duty was upheld for the month of December, 2002, levy of the duty for the rest of period and consequential penalties came to be set aside. Being aggrieved thereby, present appeal.

Shri Pradeep Jetley, learned Counsel appearing on behalf of the appellant submits that the learned Tribunal has grossly erred in setting aside the duty for period except December, 2002. The learned Counsel submits that the perusal of the order impugned would reveal that the learned Tribunal has given contradictory findings. The learned Counsel submits that one hand the learned Tribunal itself in paragraph 8 has held that Dyeing Master has no knowledge of valuation of goods as he was concerned only with the processing of fabric and on the other hand, the learned Tribunal on the basis of same material holds that for the period of December, 2002 the deemed credit which is limited to the actual extent of inflation in the value of grey fabric cleared for export under bond raised by the demand against processors was liable to be disallowed. It is submitted that when for the period of December, 2002, the stand of the department has been upheld, there was no justification to take contrary view for the earlier period.

Shri Vipin Jain, learned Counsel appearing for the respondent Nos. 1 and 2 on the contrary submits that the period except December, 2002 fell beyond the period of limitation. He submits that unless a case of fraud or suppression was made out, demand for the earlier period could not have been made. The learned Counsel submits that as to whether the department was entitled to invoke extended period of limitation or not is purely a question of fact and not law and therefore, the appeal deserves to be dismissed in limine. The learned Counsel relies on the judgment of the Division Bench of this Court in the case of Commissioner v. Madhu Textile Industries Ltd., reported in 2010 (257) E.L.T. A18 (Bom).

We have perused the material on record and also perused the impugned judgment. Main thrust of the learned Counsel for the Revenue is that the learned Tribunal misdirected itself in upholding stand of the department for December, 2002 and not applying the same principle for the earlier period. Undisputedly, for December, 2002, the provisions of extended period of limitation were not required to be invoked. However, it is not in dispute that for an earlier period, since the period fell beyond the normal period of limitation, the authority could not have invoked the jurisdiction unless a case of suppression or fraud was made out. As to whether a party has indulged into fraud or suppression is a matter, which is required to be decided on the basis of evidence. No doubt that if the material as placed on record has not been appreciated in correct prospective or has been totally neglected, the same would come in the ambit of perversity and as such fall in the ambit of question of law.

In the present case, there is a specific finding of fact that there is nothing on record which would show that the processors had personal knowledge regarding inflation of valuation of goods. Perusal of the impugned judgment would also reveal that the learned Tribunal has found that except the statement of the Dyeing Master, no material was placed on record by the Revenue to substantiate their contention with regard to fraud or suppression. As to whether the Dyeing Master has a specialised knowledge regarding valuation of goods or not is also purely a question of fact. It also appears that nothing has been placed on record to substantiate the contention that the Dyeing Master has expertise in valuation of goods. In that view of the matter, it cannot said that the view taken by the learned Tribunal is either an impossible or perverse. In any case, the view taken is a possible view. We do not find any substantial question of law arises in the present appeal. No interference is called for. Hence, the appeal is rejected.