Order date – 08 September 2022

Facts – 

• The Respondent, Filatex India Ltd., is a company engaged in the manufacture of polyester yarn of different descriptions falling under Chapter 54 of the Central Excise Tariff Act, 1985 and is holder of Central Excise Registration.
• During the inquiry conducted by officers of the Central Excise, it was observed that there was a clandestine removal of goods by the manufacturer without payment of central excise duty.
• It was submitted that no grey fabrics were manufactured from the yarn cleared without payment of duty by Respondent under Rule 12B of Central Excise Rules, 2002 to their job workers and the yarns had been diverted and sold elsewhere and records & payment transactions had been manipulated for such fictitious sale of fabrics,
• A show-cause notice dated 8th June, 2009 was issued raising a demand of duty of Rs.3,11,76,080/- under Section 11A(1) of the Central Excise Act, 1944 along with interest and also a proposal to confiscate goods valued at Rs.10,93,00,281/- with penalty under Section 11AC of the Central Excise Act, 1944 and under Rule 25 of the Central Excise Rules, 2002, which was later set aside by the Tribunal.
• Aggrieved, the appellant revenue filed an appeal.

Issue – 

• Whether the Respondent is liable to pay central excise duty along with interest and penalties for alleged bogus transactions?

Order – 

• The Court agreed with the Tribunal and observed that only on the ground that some job workers could not be found or that some of them refused to have done job work, it cannot be concluded that no activity of job work manufacturing of fabrics was undertaken.
• The statement of few transporters that they did not transport the fabric cannot be a ground to hold that no fabric was manufactured as the main job workers have accepted the manufacture of fabric on job work. 
• Even the clearance/sale of fabric and duty payment thereupon is not under dispute. There are no evidences that job work charges paid by the Appellant to the job workers flowed back to them. 
• The Tribunal has found that majority of job workers, i.e. 5 job workers out of 6 investigated, have accepted the job work manufacturing of the fabrics from the Yarn supplied by the Appellant and that no evidence has been adduced to the effect that the Respondent-Company had clandestinely removed the yarn from their factory for sale by evading central excise duty. 
• The court did not find any merit in the Appeal, therefore the appeal was dismissed.