M/S. V & S Texnits Pvt. Ltd vs C.C.E & S.T. Delhi-Iii

[Arising out of Order-in-Appeal No. 22/CE/2005 dated 30.05.2005 by the Commissioner of Customs, Central Excise & Service Tax (Appeals), Gurgaon].

For approval and signature:

Honble Shri Ashok Jindal, Member (Judicial)

Hon'ble Shri B. Ravichandran, Member (Technical)

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether Their Lordships wish to see the fair copy of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

M/s. V & S Texnits Pvt. Ltd. .Appellants

Vs.

C.C.E & S.T. Delhi-III .Respondent

Appearance:

Shri Bipin Garg, Advocate for the Appellant

Shri M.S. Negi, DR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Hon'ble Shri B. Ravichandran, Member (Technical)

Date of Hearing: 05.08.2015

FINAL ORDER NO. 52807/2015-EX(DB)

Per B. Ravichandran:

The appellants are engaged in manufacture of unprocessed and processed knitted cotton fabric. The present appeal is against the order of the original authority denying exemption under notification no. 14/2002-CE dated 01.03.2002 in respect of processed knitted fabrics manufactured and cleared by them on own account and on job work basis. The period involved is from 26.09.2002 to 05.01.2003. The Revenues case is that for the period prior to 26.09.2002 the exemption under the said notification was available to the appellant in terms of Boards circular dated 15.05.1995. Consequent upon the Honble Supreme Courts decision in the case of CCE Vadodara Vs. Dhiren Chemicals Industries-2002 (139) ELT (SC) the Board changed the circular and held that when any exemption is granted on the condition that the raw material should have suffered appropriate duty there should be some duty element. In other words, if the duty is nil on such raw material then the conditional exemption as above will not be available to the manufactured product. Based on this clarification of the Board, the demand against the appellant was raised and the case was duly adjudicated confirming the same along with penalty of equal amount.

2. In the appeal before us the appellant strongly contended that they are correctly eligible for exemption under notification no. 14/2002-CE (Sl. No.12) as they have fulfilled the conditions mentioned therein. The appellant relied on the Larger Bench decision of this Tribunal in the case of Arvind Products Ltd. Vs. CCE-2014 (310) ELT 515 (Tri-LB), the Tribunals order in the case of Suditi Industries Ltd. Vs. CCE-2013 (296) ELT 368 (Tri-Mum). The Tribunals decision in the case of Simplex Mills Ltd. Vs. CCE-2005 (189) ELT 228 (Tri-Bom).

3. During the arguments, the Ld. Counsel for the appellant reiterated that the whole demand is based on a change in the interpretation of the term appropriate duty. They purchased duty paid raw material, namely yarn, and no credit has been taken by them. They were registered with the Department. Using the duty paid yarn they manufactured knitted unprocessed fabric of cotton and they also undertake dying and other process. They also undertake job work for this process for others. When they procured duty paid cotton yarn to manufacture knitted fabric of cotton they are entitled for Sl. NO. 10 of the notification no. 14/2002 as the unprocessed fabric is captively consumed to make processed knitted fabric they are entitled for Sl. No. 12 of the said notifications. They fulfill the conditions under Sl. No. 1 & 3 of the conditions of the said notification. In respect of cotton yarn purchased from the market Explanation II of the said notification clearly states that they are deemed to have been duty paid even without production of any document evidencing payment of duty thereon. As such the exemption for unprocessed cotton fabric is rightly available. Such exempted unprocessed fabric is captively used in the manufacture of processed knitted cotton fabric and they are eligible for exemption under Sl. No. 12. They have not availed any deemed credit on unprocessed fabrics used by them.

4. On the other hand Ld. AR reiterated the findings of the original authority and stated that as per the Honble Supreme Courts decision in the case of Dhiren Chemicals Industries (Supra) the conditions of the notification are not fulfilled and as such the appellant is not eligible for exemption.

5. We have heard both the sides and examined the appeal papers.

6. It is apparent that the impugned demand arose only on the basis of change in the interpretation of the terms of notification no. 14/2002 by the Revenue. The factual position continued the same throughout. We find the appellant has made a strong case for exemption under Sl. No. 10 & 12 of notification no. 14/2002 which are subjected to conditions 1 & 3 of the said notification. The Larger Bench of this Tribunal in the case of Arvind Products Ltd. (Surpa) held in para 8.4 as below:

8.4 In view of the observations made above, there is apparent conflict between Condition 3 and Explanation II of the Notification No. 14/2002-CE, and has to be given a harmonious construction. For understanding the intention of the legislature behind this exemption we are of the considered opinion that one has to go to the Explanatory Notes and the speeches of the Finance Minister, if any, given at the time when exemption under Notification No. 14/2002 was issued. It is observed from the case records that Explanatory Notes of Budget Bulletin 2002 with respect to Notification No. 14/2002-CE dated 01.03.2002, under the heading II Textile Fabric clarified as II Textile Fabric. Notification No. 14/2002-CE and 15/2002-CE both dated 01.03.2002 prescribes effective rates of duty of nil of 12% adv, in the case of textile fabrics subject to the conditions that the goods have been made from textile yarns of fabrics on which the appropriate excise duty or CVD has been paid. It may, however, be noted that Explanation II to the notification makes it abundantly clear that all fibres and yarns are deemed to have been duty paid even without production of documents evidencing payment of duty. Therefore, the manufacturer is eligible for the rates prescribed in the notification. The only condition that has to be satisfied is with regard to availment or non-availment of Cenvat Credit as the case may be.

It is thus made clear that the benefit of the rate of duty should be allowed without insisting upon any documentary proof for payment of duty. However, if the manufacturer wants to avail Cenvat Credit of duty paid on inputs or capital goods on actual basis, he will be required to produce duty paying documents as prescribed under the Cenvat Credit Rules...

9. In view of the above observations we hold that decisions taken in the case of CCE Ludhiana Vs., Prem Industries, Simplex Co. Ltd. and Morarjee Gokuldas Spg. & Wvg. Co. Ltd. were correct interpretation of exemption notification no.14/2002-CE dated 01.03.2002. Accordingly, benefit of Sr. No. 12 of notification no. 14/2002-CE will be admissible to the appellants by considering the fabric received for processing as deemed duty paid as per Explanation-II of Notification NO. 14/2002-CE. Any other interpretation will make this explanation redundant. Further, such a deemed fiction was not existing before the Honble Supreme Court while delivering judgment in the case of Dhiren Chemicals Ltd.

7. This Tribunal in the case of Suditi Industries Ltd. (Supra) again examined similar issue regarding exemption under above said notification and distinguished the decision of the Honble Apex Court in the case of Dhiren Chemicals Industries (Supra) as under:

11. We have examined the decision of the Apex Court in Dhiren Chemical Industries wherein the Honble Apex Court has interpreted on which appropriate duty of excise has already been paid and in this case the expression used in condition Nos. 1 and 3 is on which appropriate duty of excisable leviable read with any notification for the time being in force..has been paid under Notification 14/2002. The ratio of Dhiren Chemical Industries (Supra) will not apply to the present case.

8. Considering the above discussion we find that denial of exemption under notification no. 14/2002 to the appellant is not legally sustainable. Accordingly, we set aside the impugned order and allow the appeal with consequent relief, if any.

(Operative part of the order pronounced in the open court)

(B. Ravichandran) (Ashok Jindal) Member (Technical) Member (Judicial)

Bhanu

2

E/3714/2005-EX(DB)