COMMISSIONER OF CENTRAL EXCISE, BOMBAY versus M/S. RELIANCE INDUSTRIES LTD.

Citation: [2004] SUPP. 3 S.C.R. 628 · Decided: 19-08-2004 · Supreme Court of India · Bench: S.N. VARIAVA · Disposal: Disposed off

Judgment (excerpt)

A 
COMMISSIONER OF CENTRAL EXCISE, BOMBAY 
B 
c 
v. 
M/S. RELIANCE INDUSTRIES LTD. 
AUGUST 19, 2004 
[S.N. VARIAVA AND ARIJIT PASA YAT, JJ.] 
Central Excise Act, 1944/Central Excise Rules. 1944; Rules 49, 173F 
and 173G(1) rlw. Rule 9(1) : 
Short payment of excise duty on Polyster Filament Yarn-Show cause 
notice-Demand confirmed by Revenue-Quashed by CEGAT-On appeal, 
Held :Tribunal failed to consider various aspects relating to evasion of 
duty--Yarn winds on tubes does not cease to loose its characteristics 
merely because it breaks off before forming into a product of desired 
D weight/specification-It cannot be treated as waste as claimed by the 
assessee-No reasons for treating it so, explained by the assessee-
Tribunal to hear the matter afi"esh in accordance with law-Directions 
issued. 
E 
Appellant-Revenue issued a show cause notice to respondent-
assessee alleging short payment of duty on account of non-disclosure 
of actual production of Polyster Filament Yarn (POY) in the appropriate 
records and its removal without payment of duty thereon. The Collector 
confirmed the demand of certain amount of excise duty, imposed 
F penalty and ordered confiscation of the goods or fine in lieu of 
confiscation. Assessee challenged it before the CEGAT. Appeal was 
allowed by the Tribunal on the ground that there was no allegation of 
fra"d, mis-declaration or intention to evade duty. Hence the present 
appeal by the Revenue. 
G 
It was contended for the Revenue that the specific case of the 
authorities was that what was cleared was taken as waste but it was 
sold as yarn; that there was definite indication in the show cause notice 
about the intention to evade duty; that the Tribunal did not notice that 
in order to show what was being taken out was waste, separate register 
H was required to be maintained; that allegation was of mis"declaration 
628 
C.C.E. v. RELIANCE INDUSTR1ES LTD. 
629 
so far as yarn is concerned, and not of waste as was observed by the A 
CEGAT; that for removal and destruction of waste, particular procedure 
in terms of Rule 49 is prescribed but that has not been followed; that 
the effect of presence of the goods in the finishing room and the 
purpose as to why it was taken there, has not been explained by the 
assessee; and that if the stand was that the goods in question were B 
waste, the assessee was required to prove it. 
Assessee submitted that there was no suppression or mis-
declaration as claimed by the authorities; that it has not been shown 
by the Revenue that as to how there was any intention to evade 
payment of excise duty; and that since the documents placed before C 
the Collector were not considered by it, CEGAT was justified in setting 
aside the order of the Collector. 
Dismissing the appeal, the Court 
HELD : I.I. Tribunal has not approached the controversy in the 
proper perspective. Various aspects which have been specifically noted 
D 
by the Collector were really not considered by CEGAT. Its conclusions 
that there was no allegation of fraud, mis-declaration or intention to 
evade duty,primafacie do not appear to be correct. The material being E 
wound on tubes was yarn. It did not cease to be yarn because it broke 
off before the required weight was achieved. It only became waste if it 
got entangled or messed up or ifthe tubes ofless weight were cut. It was 
for the assessee to show categorically that this happened. [633-8, C, DJ 
1.2. The log sheet deal with tubes. But without question the weight F 
shown in the log sheets is of yarn. This primafacie indicates that tubes 
having yarn of less than I kg. are also being logged. Thus, the Collector 
was right in arriving at the conclusion that the log sheets show presence 
of yarn on tubes, even of 1 kg. or less. The Collector had specifically 
noted that if the assessee had destroyed the tubes of 1 kg. or less of G 
POY, the reason why the production as shown in the daily log sheets 
was not explained. Thus, fresh hearing of the appeal by CEGAT would 
be the ap1nopriate course. So far as para (iv) of the show cause notice 
is concerned, the matter is remitted back to the CEGAT for fresh 
hearing and adjudication in accordance with law. So far as part (v) of H 
630 
SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R. 
A show cause notice is concerned, the view of the CEGAT is correct. 
1633-D, E, H; 634-AI 
B 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3226 of 
1998. 
From the Judgment and Order dated 28.11.97 of the Cen

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