ORDER
V.K. Ashtana, Member (T)
1. This is an appeal of Revenue against Order-in-Appeal No. 142/97 (CBE) dated 11-4-1997 regarding availability of the Modvat credit under capital goods scheme to Carding Machines received by manufacturers in April, 1994 for the reason that carded/combed cotton (an intermediate product), being marketable, is “goods”.
2. Heard Smt. Aruna Gupta, learned JDR who submits that the issue has already been examined in great length by the Tribunal in the case of Singaravelar Spinning Mills Pvt. Ltd. and Ors. are reported in 1999 (105) E.L.T. 630 (Tribunal). 12. The main contention of the appellant was that the process of manufacture commenced in 1980 and it took eight long years to erect the machine part by part and various processes disclosed that finally erected machine was not a movable property but an immovable property.
3. The Second ground urged was that the demands are barred by time as they had intimated as back as 1974 through their letter dated 6-12-1974 about their proposal to instal an additional equipment/machinery at their factory to achieve the above production. They had filed detailed list of equipments/machineries to be installed through the Asst. Collector of Central Excise. The enclosures had mentioned about the erection of this machine. It was also contended that the factory itself was under the physical control during the period when the machine was installed. There were various visits of the inspectors and the details of inputs purchased for erecting figured in the balance sheet. All these details had been noted by the Audit Office also. Therefore, they contended that the demands are barred by time. Further, they contended that as the issue pertaining to erection at site was a disputed question leading to the bona fide belief and hence demands cannot be confirmed as appellants held bona fide belief that such erection did not constitute manufacture.
4. The Collector overruled both these pleas and confirmed the demands and imposed penalties adjudicating (sic) authority and therefore this decision has been taken behind their back. He further submits that even with respect to two evidences cited in the case of Singaravelar Spinning Mills (supra) namely the sale of 8674 kgs. of carded/combed cotton by M/s. Kandaswamy Spinning Mills to M/s. J.K.K. Nataraja Mills as well as that by M/s. Hi-life Textiles Pvt. Ltd. to M/s. Hi-life Padma Weaving Inc. that was sold was cotton simplex bobbins and that was different from carded/combed cotton inasmuch as that the simplex machine comes into operation at the stage subsequent to the stage of carding/combing. Learned Advocate submits that carded/combed cotton after being so treated on the carding/combing machine, is rendered some amount of twist in the simplex machine and it is only then that it can be wound on bobbins. It is his simplex bobbins which were treated as marketable as per the evidence of the department and as per the best of this respondents’ knowledge. Since, this simplex bobbins product is not combed/carded cotton, which does not have any twist whatsoever, therefore evidence is not material to the issue in their case. Learned Advocate submits that since to the best of their knowledge the goods relied upon as marketable were different than carded/combed cotton and since before passing the Order-in-Original noted above, the Asst. Commissioner had not shown this evidence to them before relying upon it in the said Order, therefore they were denied an opportunity to test the facts relied upon by the department as it was their right under principles of natural justice.
4. He, therefore, submits that since a clear finding is available on record as to the exact facts on the marketability of this product, particularly in view of their knowledge that it was simplex bobbins which were treated and not carded/combed cotton, it would not be just and correct to apply the ratio of the decision in the case of Singaravelar Spinning Mills Pvt. Ltd. to their case. Learned Advocate therefore prayed that the matter be remanded to the original adjudicating authority with the direction that he shall make available evidences in the form of sale documents to the respondents and hear them on this evidence before deciding the matter afresh.
5. I have carefully considered the arguments on both sides and records of the case. I find that in the case of Singaravelar Spinning Mills Pvt. Ltd. (supra), it had not been contested that the two evidences of the Revenue could have been suspected. Therefore, the Tribunal in that case had accepted them as unchallenged evidences led by Revenue. However, in this appeal, the respondents are now seeking to test the veracity of these evidences on the ground that before an adverse decision is given against them, they have a right to examine the evidences upon which it is based and to respond to the same before the original authority. In doing so, the learned Advocate has given a reasonable explanation to back his request. This explanation is that normally carded/combed cotton is in slivers and is temporarily stored in the factory in drums but if it is transported the fibres can again get jumbled-up thus loosing their carding and combing. Therefore, what is traded is after imparting a twist to this sliver in the simplex machine whereby the fibres can be then wound on bobbins. I find on a perusal of the said decision that in the case of evidences with respect to M/s. Hi-Life Textiles Pvt. Ltd., the description of the goods given by Revenue has evidence as “17400 kgs of the cotton simplex bobbins to M/s. Hi-Life Padma Weaving Inc.” The presence of the words “simplex bobbins” therein leads credence to the submission of the learned Advocate as noted above. I have also perused the Order-in-Original wherein the Assistant Commissioner has held that carded/combed cotton is a marketable product on the basis of the sale by M/s. Kandaswamy Spinning Mills . However, in view of assertion by learned Advocate that in that case also it is extremely likely in view of a technical situation involved, that the sale was of cotton simplex bobbins and not of carded/combed cotton, therefore, I find that the submission of Learned Advocate that the assessee has right to examine this evidence and to react to the same before the original authority holds great merit. This is particularly because the said evidences were not made available to the assessee before the Order-in-original was passed, even though an op Paragraph number as per certified copy. portunity had been given to hear them. Now that for the first time the very basic evidence in this entire case is seriously being challenged, it is but necessary for both sides that the matter is reconsidered by the original authority with respect to the actual nature of the evidence relied upon by Revenue and that the same should be made available to the assessee so that he can react to it before the original authority. It is strongly felt that if this request is denied, it shall result in denial of justice.
6. In view of the aforesaid analysis, it is ordered that both the Order-in-Appeal impugned and Order-in-Original leading thereto are set aside and the matter is remanded to the original authority namely Assistant Commissioner having jurisdiction over the present respondents for de novo consideration after making available the evidences regarding the marketability of combed/carded cotton to the assessee i.e. present respondents and after hearing them on this issue Ordered accordingly.