Customs, Excise and Gold Tribunal - Mumbai
Regal Crimptex Pvt. Ltd., Shri K.S. ... vs Commissioner Of Central Excise on 19 September, 2003
Equivalent citations: 2004(167)ELT324(TRI-MUMBAI)
JUDGMENT
S.S. Sekhon, Member (Technical)
1. The appellants are a manufacture of Textured Nylon Filament Yarn. They captively consumed the portion of Nylon Textured Yarn to manufacture Nylon Twisted Yarn & is also clearing at on payment of duty as also Texture Nylon Filament Yarn. They also manufacture Polyester Texture Yarn (hereinafter referred as PTxY) from Partially Oriented Yarn (hereinafter referred as POY) which is purchased. This PTxY is entirely consumed and is not cleared for home consumption, no duty is paid on it when captively consumed for manufacture of twisted yarn (hereinafter referred to PTY) by virtue of Notification No. 67/97-CE. PTY is however, cleared on payment of appropriate duty to the appellant's sister concern for dying were duty is paid on Dyed yarn. Thereafter such dyed yarn is cleared on payment of duty to independent customers also. The PTY sent to the sister concern for dying is sent on job work basis under the provision of Notification No. 214/86-CE. PTY is also cleared for export after dying from the sister unit.
2. The appellants availed credit of duty paid on POY cleared this credit is utilized for payment of duty on final product cleared from the factory of the appellants i.e. on PTY. The aggregate duties of excise, paid by the appellants on the clearances of (PTY) is 36.8% advalerem [BED + SED + AED (GSI)]. The aggregate of duties of excise paid on nylon twisted yarn is 18.4% as val. [BED + AED (TTA)].
3. The Department took up enquiries and issued notices alleging:-
i) Appellants are "independent texturisers" engaged in the manufacturer of Ptxy;
ii) PTxY attracts basic excise duty of Rs. 250 per kg. Vide Notification No. 6/2000-CE (Sl. No. 114) read with condition No. 17A which stipulates that no credit of duty paid on the input is taken by the manufacturer.
iii) Rule 57AB(2) (SIC) provides that no credit of duty paid on the inputs shall be allowed in respect of PTxy manufactured by an "independent texturiser";
iv) The appellants being an 'Independent texturiser' are not eligible for input credit and hence the credit availed by them on POY is not admissible and therefore, ordered recovery of the credit taken by the appellants on POY amounting to rs. 30,52,115/- for the period 16/03/2000 to 31/01/2001. Another demand of Rs. 3,16,898/- was raised on the grounds that the appellants ought to have reversed the credit of duty paid on inputs lying in stock on 01/03/2000 of Rule 57H(7)(A), since that credit has been utilized by the appellants, a demand of duty was made for the same. Penalties were also imposed on the appellants and on employees.
4. After hearing both sides and considering the matter it is found:-
a) The Commissioner in the impugned order has relied upon the registration certificate, granted to the appellants, to hold that the appellants are independent texturisers and hence the bar contained in Rule 57AB(2)(c) is applicable. However, this registration certificate does not refer the appellants as an independent texturisers, as found by the Commissioner. The registration certificate apart from indicating the description of excisable goods as textured yarn, also indicates twisted yarn. Therefore going by the reliance of the Commissioner, the appellants will have to be treated as 'twister' also. That is they are not only 'Texturisers' but 'Twisters' also. They could be independent Texturise. The registration certificate therefore relied upon by the Commissioner does not conclusively decide the matter in favour of the department.
b) Notification 6/2000 at Serial No. 114 & 115 of the table read as under:-
d 114 54.02 Texturised yarn including draw twisted and draw wound Yarn) of polyesters, manufactured by an independent texturiser who does not have the facilities in his factory [including plant and equipment) For producing partially oriented yarn (POY) of polyesters falling under sub- heading NO. 5402.42.
Rs 250 per Kg Nil 17A 115 5402.32 or 5402.52 Twisted Polyester filament yarn Manufactured out of textured or draw-twisted polyester filament yarn falling within Chapter 54 of the First Schedule on which the appropriate duty of excise under the First Schedule, special duty of Excise under the Second Schedule to the Central Excise Tariff Act or as the Case may be, the additional Duty leviable under the Customs Tariff Act, 1975 Has already been paid.
Nil Nil
c) Rule 57 AB2(c) reads as under:-
"(c) CENVAT credit of the duty paid on the (POY) shall not be allowed in respect of texturised yarn (including draw-twisted or draw-wound yarn) of polyesters falling under heading No. 54.02 of the said First Schedule, manufactured by an independent texturiser, that is to say, a manufacturer engaged in the manufacture of texturised yarn (including draw-twisted or draw-wound yarn) of polyesters falling under heading No. 54.02, who does not have the facility in his factory (including plant and machinery) for manufacture of partially oriented yarn of polyesters falling under sub-heading No. 5402.42 of the said First Schedule."
d) A plain reading of the above, indicates that in relation to PTxY, an 'Independent Texturiser' will be such a manufacturer, who is engaged in the activity of manufacture of PtxY. But who does not have facility for manufacture of POY falling under heading 5402.42 of First Schedule to C.E.T.A. 1985. The finding of the Commissioner, that such Independent Texturisers are required to pay the rate of duty as per serial No. 164 of notification on PTxY on the following finding:-
"It is clear from the above that 'independent texturisers' of polyester are not entitled for modvat/cenvet credit of duty paid on POY and they have to pay duty @ 2.50 Per Kg. Further, they have obtained Central Excise Registration as 'texturisers' and by doing process of twisting on textured polyester yarn, the unit does not cease to be a 'independent Texturiser'. The main process undertaken by the noticees is of 'texturing of polyester yarn' and as they have no facility in their factory (including plant and machinery) for manufacture of partially oriented yarn of polyester, falling under sub heading NO. 5402.42 of the said First Schedule, they are to be considered as 'independent Texturisers' only. The notification does not stipulate that if the factory is also doing the process of twisting on such textured polyester yarn, it would not be treated as independent texturiser. The arguments made by the notice to the effect that they used textured polyester yarn captively in the manufacture of twisted yarn and availed exemption on textured yarn vide Notification No. 67/95-CE and cleared twisted polyester yarn from the factory on payment of appropriate duty and therefore they have rightly availed Credit on POY, is not valid and is not acceptable."
cannot be upheld, since no reasons are arrived at as to why by doing process of twisting, on Texturised Yarn, the unit should be an independent Texturiser. There is no reason to conclude that the appellants 'main process undertaken' is of 'Texturising' merely on basis of POY machinery not being available since they are also licenced as "Twisters of Yarn" also. The process of 'Twisting' not being mentioned in the notification would not lead to the conclusion as arrived at. There is force in the argument that 'Textured Yarn' is captively consumed in the 'Twisted Yarn' by them. There is no counter to this proposition. They are thus engaged,objectively as 'Twisters' and 'Texturising' is an intermediate stage process incidentally being carried out. Independent processors would be those persons who are engaged only in texturising of yarn and twisting is a process of manufacture in itself as per Note 3 to Chapter 54. The appellants are, therefore not being held to be Independent processor as defined in Rule 57 AB (2)(c), as they are engaged in the manufacture of twisted yarn also.
e) It is well settled position that a manufacturer can not be denied the benefit of a notification, if the same is available to him, by opting to pay duty on Polyester Textured Yarn, the appellants would have paid more duty.
a) Credit availed on POY during 1.3.2000 to 27.2.01 Rs 34,51,1597-
b) Duty paid on twisted yarn during 1.3.00 to 27.2.01 (through PLA & Cenvat) Rs 42,22,266/-
c) Duty payable on textured yarn at the specific rate for the captive consumption Rs 4,68,684,92/-
If the contention of the department is accepted, then appellants ought to have paid duty on twisted yarn since it is exempt from duty in terms of Notification No. 6/00-CE (Sl. No. 116). Duty is required to be paid on textured yarn is only Rs. 4,68,684.92/- in terms of Sl. No. 114 of Notification No. 6/00-CE.
f) The duty paid on the 'twisted yarn' has therefore to be treated as reversal of credit of duty availed on POY is a submission made relying on the following decisions of the CEGAT.
a) 2002 (143) ELT 619 Singh Scrap Processors Ltd., v. CCE Mumbai-1
b) 1997 (96) ELT 659 (Tri) Deioners Speciality Chemicals Pvt Ltd v. CCE
c) 2002 (49) RLT 741 (Tri) CCE v. Primal Spinning & Weaving Mills Ltd., and that can not be found fault with.
g) As regards demand of Rs. 3,16,898/- as per Rule 57 H(7A), according to the department, the duty paid on nylon twisted yarn out of Cenvat credit during 1.3.2000 to 31.1.2001 is Rs. 36,87,520/-, therefore credit of duty paid on nylon yarn available for utilization of nylon twisted yarn was only Rs. 33,70,656/-. The notice therefore proceeds on the footing, that balance duty of Rs.3,16,864/- paid on the clearances of nylon twisted yarn is out of Cenvat credit availed on POY. Therefore, the department proceeds to recover duty of Rs. 3,16,864/- on the ground that credit has lapsed in view of Rule 57A(7A). In view of the finding herein, this view cannot be sustained.
h) Penalty, under Section 11 AC imposed, could be upheld, as when the demands raised, invoking the proviso to Section 11 A(1) are upheld. Since show cause notice has been issued without invoking the extended period i.e. within the normal period of 1 year, penalty under Section 11AC is not called for.
5. In view of the findings herein, the order is required to be set aside and appeal allowed.
6. Order accordingly.
(Pronounced in open court on 19/09/2003)