Order Date: 8 September 2022

Facts-

• The Respondent, M/s. Filatex India Ltd is engaged in the manufacture of polyester yarn, and is the holder of Central Excise Registration. In an inquiry, it was observed that there was a clandestine removal of the polyester yarns by the Respondent from their factory for sale without payment of central excise duty and the same were not used for manufacturing fabrics.
• Following this a show-cause notice dated June 8, 2009 was issued by the Commissioner, Central Excise raising demand of duty of Rs. 3,11,76,080/- under Section 11A(1) of the Central Excise Act along with interest and also a proposal to confiscate goods valued at Rs.10,93,00,281/-. Subsequently, Order in original dated 22 June 2011 was passed confirming the demand and penalties were also imposed on the Joint Managing Director and other officers of the Respondent under Section 11AC of the Central Excise Act.
• Being aggrieved by OIO the Respondent filed an appeal in the CESTAT and the appeal was allowed by the CESTAT vide Final order dated April 11, 2019 observing that mere statement by few of the transporters that they did not transport the fabric cannot be a ground to hold that no fabric was manufactured.
• Being aggrieved by the OIA, the Appellant, Principal Commissioner of CGST filed the present appeal under Section 35G of the Central Excise Act.

Issue-

• Whether the Respondent can be held for clandestine removal of polyester yarns merely based on statements by the transporters?

Order-

• The Division Bench of Hon’ble High Court observed that an appeal shall lie against the order of the Appellate Tribunal if the High Court is satisfied that the case involves a substantial question of law. The Revenue appears to be agitating factual aspects in the matter. A perusal of the Tribunal order indicates that the Tribunal after having heard both sides and after having perused the case records has given a fact finding on the issues raised on behalf of the Appellant-Revenue. In the present case the fabric was shown to have been manufactured from six job workers.
• The Tribunal has given a finding that it is undisputed that the Department was in knowledge of the job work activities, that while sending goods, the challans were prepared and the yarn was acknowledged by the job workers of having been received. Respondent-Company has paid job work charges to the said job workers and also deducted TDS on such payments as found by the Tribunal from Form-16A issued to all six job workers. It is also recorded by the Tribunal that during investigation, the statements of the Joint Managing Director, Director and employees of Respondent-Company were recorded and all of them have stated that the goods were sent for job work. The Tribunal also records that in respect of six job workers were existing at the time of investigation. It is further recorded that none of the statements from the job workers recorded by the investigation deny the fact that they had undertaken job work activity on behalf of Respondent-Company.
• Further, no evidence has been adduced to the effect that the Respondent had clandestinely removed the yarn from their factory for sale by evading central excise duty.
• The Court held that there is no merit in this Appeal and the Appeal stands dismissed.