METTUR SPINNING MILLS LIMITED Vs. CESTAT

JUDGEMENT

(1.) The Civil Miscellaneous Appeal is filed by the assessee calling in question the correctness of the order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai-6, dated 16.4.2009 in Final order No.449 of 2009, which was admitted on 17.09.2010 for consideration of the following substantial questions of law;

(2.) The appellant is engaged in the business of manufacturing cotton yarn falling under tariff sub heading 5205.11 of the first schedule of the Central Excise Tariff Act,2006. On account of labour unrest and financial constraints, it stopped its production activities and subsequently during the year 2000, the appellant Mill was taken over by M/s.CP Spinning Mills (P) Ltd, pursuant to which, manufacturing activities once again commenced. Thereafter, various MOUs were entered into between the parties, as per which, M/s.CP Spinning Mills (P) Ltd had been sending the raw materials viz., cotton to the Appellant's factory and it would receive back the cotton yarn from the appellant unit and thereafter it would sell the same.

(3.) Whileso, the appellant premises was visited by the officials of Directorate General of Central Excise Intelligence and certain documents were recovered. After enquiry, a show cause notice dated 14.12.2004 was issued to the appellant alleging that cotton yarn in cone was manufactured and cleared without payment of duty of excise duty by the Appellant during the period August 2000 to June 2002 and in some cases, cotton yarn in cone had been cleared in the guise of hank yarn, which was exempted from payment of duty and in some case, the cotton yarn had been undervalued, thus demanding duty of Rs.2,90,92,416/- and penalty thereon under section 11AC was imposed in addition to demand of interest under section 11 AB of the Act and further appropriating the amount of Rs.11,00,000/- already paid towards duty. The show cause notice also proposed to impose penalty on the other indiviudals viz., P.Balakrishnan, Managing Director of MSML, P.K.Mahamune, Proprietor of Preeetha Cotton Traders and D.Krishnan, Proprietor of SP Trading Company. Thereafter on 31.10.2006, the Commissioner of Customs and Central Excise, Salem, the 2nd respondent herein passed order in original bearing No.10 of 2006 confirming the duty demand of Rs.2,90,92,416/- and appropriating Rs.11,00,000/- already paid by the appellant; demanding interest on the proposed demanded duty under section 11AB of Central Excise Act 1944; imposing penalty of Rs.2,79,92,416/- under Rules 9(2), 52A, 173Q and 210 of the Central Excise Rules 1944, Rule 25 of central Excise(No.2) Rules, 2001 (erstwhile) and Rule 25 of the Central Excise Ruloes, 2002 r/w.Section 11 Ac of Central Excise Act, 1944; The 2nd respondent also imposed a penalty of Rs.2,75,00,000/- on Mr.P.Balakrishnan, Managing Director of M/s.CPSML ; Rs.10,00,000/- on Mr.P.K.Mahamune, proprietor of Preetha Cotton Traders, Tirupur; Rs.10,00,000/- on Mr.D.Krishnan, Proprietor of SP Trading company and Rs.5,00,000/- on Mr.M.Kathiresan, Partner, Bhagavathi Yarns, Palladam under the Act. Aggrieved against the above said order, the appellant preferred an appeal before the first respondent and the second respondent herein also preferred cross appeal. The first respondent, vide final order No.449 of 2009 dated 16.4.2009, allowed the appeal preferred by the second respondent upholding the duty demand as well as penalty imposed by it and enhanced the penalty to Rs.2,90,92,416/-. Aggrieved against the order passed by the 1st respondent, the appellant is before this Court.