Demand Notice of Textile Cess

PJ/Case Laws/2010-11/1069

Case:Shree Char Bhuja Processors Ltd v/s Textiles Committee

Citation: 2011 (263) E.L.T. 709 (Tribunal)

Issue:- Demand under Textile Committee cess can be issued on the basis of figures given by Central Excise department and not on the basis of figures supplied by AG office.

Brief Facts:- Appellant-assessee was given Demand Notice for the period from 1/2006 to 9/2006. Appellant is challenging the said demand notice dated 06.06.2008.

Show cause Notice but have not received the same and no opportunity was given for hearing and the Department contending that appellant being processor is a manufacturer and as such liable to pay cess issued a Demand notice of Rs. 564293/-.

Appellant’s Contention:- Appellant contended that Show cause notice was not given before issuance of the Demand Notice. It was submitted that Rule 8 of the Textile Committee (Cess) Rules, 1975 provides for giving an opportunity of being heard which has not been given and therefore, the Demand Notice is dehors this Rule and as such not sustainable under law. It was further argued that appellants are not manufacturer of textile and therefore, Section 5A(1) of Textiles Committee Act, 1963 will have no application.

It was also contended that imposition of cess amounts to double taxation as he has already paid the central excise duty. It was submitted that the matter in this case is same as that of the case of TCA No. 69/2004. Therefore, the said judgment was applicable in appellant’s case and it should be decide accordingly.

To the Revenue contention that show cause notice was issued for personal hearing, appellants has admitted that a show cause notice was issued and it sought time, but no time was granted and the impugned Demand Notice is issued. An affidavit is filed by the appellants in this regards.

Appellant has also pointed out that an indication is given in the demand notice that the figures were taken from the Accountant General, Rajasthan, Jaipur. It was submitted that the figures can only be taken from the Central Excise Department and not otherwise, as per Rule 7 and therefore, on this count, the Demand Notice is ex facie erroneous and liable to be struck off.

Respondent’s Contention:- Revenue contended that Show Cause Notice dated 06.12.2006 was issued to the appellants for giving a personal hearing on 28.12.2006 but the appellants did not avail the same. Revenue cited the Supreme Court judgment in M/s Ujagar Prints & Ors. v. Union of India & Ors.[1988 (38) E.L.T 535 (S.C)], wherein it was held that processes of bleaching, dyeing, printing, sizing, shrink proofing etc. amount to manufacture, therefore, the appellant, being a processor is a manufacturer and as such liable to pay the cess. It is further urged that there is no double taxation.

Revenue argued that in TCA No. 69/2004 no show cause notice was given and the judgment was passed on this score but the instant case is distinguishable and, therefore, the judgment of that case will not be applicable and it cannot be called a covered case.

Reasoning of Judgment:- It was noted that the Revenue has not countered the fact that time prayed for in the said show cause notice was mot granted to the appellant.

The Tribunal found that two factors weigh heavily on the appellants, on is that no opportunity was given to the appellants of being heard and the figures were obtained from the Accountant General, Rajasthan, Jaipur, which is contrary to Rule 8. Moreover, no explanation is given by the Revenue as to why time was not granted when extension was sought. The principles of natural justice are not followed in this case by the Revenue by depriving a hearing.

On this very issue, Demand notice held to be not sustainable under law as it is de hors Rule 8 and is quashed.

Decision:- Appeal allowed.

Comments:- These are many issues of the textile manufacturers are pending before the tribunal. The textile committee has decided the cases without giving hearing. Further, the textile committee case has also decided in case of Pawan Exports Pvt. Ltd. Vs Union of India [2010 (255) ELT 192 (All.)] that the cess is not applicable when fabrics is processed from or out of handloom or powerloom industry. Since it is established fact in all textile processing units that the grey fabrics is coming from powerloom industry and hence cess not applicable. It is applicable only in cases where the manufacturer takes yarn and then do the weaving and then processing. If he is undertaking the processing only then the cess is not applicable. Further, this new point has also come that the figures are to be taken from the department and not from AG office. These decisions will give relief to textile processors from these old demands.

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PJ/Case Laws/2010-11/1069

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