Customs, Excise and Gold Tribunal - Mumbai
Commissioner Of C. Ex. & Cus., Surat-Ii vs Shree Radhey Textiles on 16 January, 2002
Equivalent citations: 2002(143)ELT91(TRI-MUMBAI)
ORDER Gowri Shankar, Member (T)
1. The common question for consideration in these 15 appeals by the Commissioner arises as follows. By amendment effective from 25-4-94, Notification 1/93 textured yarn became a commodity specified in the table to that notification. A manufacturer of such a commodity was entitled to the benefit of the exemption to that yarn contained in the notification. The notification divides the goods available to exemption to three slabs, describing the rate of duty for each. In the case of first clearance of the goods "up to aggregate value not exceeding 30 lakhs" there is complete exemption from duty if the manufacturer does not avail of Modvat credit; in the case of clearance of an aggregate value not exceeding Rs. 20 lakhs of these clearance, the duty is exempted on goods to the extent 10% ad valorem, otherwise payable. In that case of further clearance not exceeding Rs. 25 lakhs the exemption is to the extent of 5% of the duty otherwise payable. This is the duty payable if the manufacturer does not avail of Modvat credit.
2. The notice issued to each of the assessees proceeded on the footing that "first clearances" referred to in Paragraph 1 of the notification would take into account clearances made from 1-4-94 and challenged the basis on which the manufacturer had paid the duty, by calculating the first clearance from the date on which they opted for the notification by filing classification lists for the product. The assessee replied stating that, although the textured yarn had been incorporated in the course of list specified in the table to the notification on 25-4-94, the benefit of Modvat credit was made available only on 20-5-94. It was the intention of the Government to provide complete benefit of concession of duty up to clearance of Rs. 75 lakhs.
3. Adjudicating on this notice, the Asstt. Commissioners took notice of the decision of the Southern Prestress Wires (P) Ltd. v. CCE -1994 (72) E.L.T. 184 and BT Solders Pvt. v. CCE - 1991 (52) E.L.T. 587 and the decision in Watts Electronics P. Ltd. v. CCE - 1994 (70) E.L.T. 127. He concluded that it was the common ratio of these decisions that the "first clearances" referred to in Notification 1 /93 would mean clearance of goods eligible for the benefit of notification. Since the goods became eligible for notification only on 20-5-94 any clearance made prior to this date could not be clearance of specified goods and would not be includable. He therefore confirmed the demand issued to the assessee.
4. The assessee appealed this order. In his common order disposing of the appeals, the Commissioner (Appeals) noted the notification as it stood at the relevant time. He found that the textured yarn was entitled to the benefit of notification from 15-4-94 onwards. It however became entitled to the Modvat facility from 20-5-94 . He noted that the assessee therefore took the view that the benefit of the notification only became available to 20-5-94. Before this date, they could not resort to the exemption contained in Clause (a)(ii) of the notification which provided a concessional rate of duty in case the assessee avails of the Modvat benefit. He therefore said that the issue for decision is whether the department is entitled to include in calculating the aggregate value of clearance from 1-4-94 to 20-5-94 or whether it is only the clearance up to the date of filing the classification list which are to be included. He noted that the Asstt Collector had said "The Asstt. Commissioner's finding in all the orders in original is that the turnover of the goods cleared at full rate of duty is excludable up to 20-5-94 and not after this period and the appellants are either to pay duty at the full rate or to avail full exemption." He said "This finding of the lower authority is mostly correct except that when a manufacturer operates under Rule 56A, he cannot avail full exemption as envisaged under Para 1(a)(ii) in view of the proviso to Sub-rule (2) to Rule 56A. In other words, the manufacturer cannot have the benefit of Notification 1 /93 under Paragraph 1(a)(ii) or a(ii) with the proforma credit under Rule 56A. However, the manufacturer can avail the full duty minus 10% with proforma credit under Clause 1(b). But this facility is available only for a short period from 23-4-94 to 20-5-94. With effect from 20-4-94 the manufacturer can have the benefit under Clause 1(a)(i) or (b) or (c). In other words since the goods falling under Chapters 54 and 55 were not declared as "specified goods" before 25-4-94 the benefit under Notification 1 /93 cannot be extended retrospectively. Though they become eligible from 25-4-94, the benefit under Para 1(a)(i) or (b) is not available till 20-5-94 as the inputs and final goods have not been specified under the notification issued under Rule 57A. Accordingly the orders-in-original confirming the duty demand by computing the aggregate value of clearance from 1-4-94, instead of 20-5-94 or after when the appellants claimed by way of Classification lists, was not in order and maintainable. However, the clearances made before 20-5-94 or full rate would be taken into account while computing the aggregate value of Rs. 2 crores for the entire financial year 1994-95 for SSI benefit purposes. Accordingly the impugned order mentioned in the enclosed annexure to this order are set aside and I allow these appeals."
5. The grounds in the department's appeal are that "the clearances in the present case are to be taken into consideration with effect from 1-4-94 only and not from date when the assessees filed the Classification list. The order passed by the lower authority is as per the law and accordingly, the differential duty is required to be paid by the assessee."
6. We cannot help noticing a lack of clarity in all stages of the proceedings. The basis for the demand for the duty is that the clearance from 1-4-94 are to be included in calculating the aggregate value on each slab. However the figures in the annexure to the show cause notice are not in conformity with this premise. For example, in the notice issued to Ashirwad Synthetics (appeal 2624) duty has been demanded only on clearance from September, 1994. The value of the clearance prior to this date are not indicated. The annexure to the notice which contain the figure however says that the differential duty is not to be recovered in respect of clearance in excess of first Rs. 50 lakhs and subsequent Rs. 25 lakhs and in excess of Rs. 75 lakhs after calculating clearance value from 1-4-94. The notice issued to Shree Radhey Textile (appeal 2622) seems to exclude the clearance exceeding 40 lakhs made between April and July before demanding duty.
7. The order of the Asstt. Commissioner appears to us to be contradictory. While he says that the clearance only after 25-4-94 when the goods became included in the notification are to be taken into account in determining the aggregate value of clearance, because it is only then that they became specified goods. He has confirmed in every case the entire duty that has been demanded calculated on the basis of the aggregate value of clearance from 1-4-94. The Commissioner (Appeals) has obviously misinformed himself about the Asstt. Commissioner order because he says that he included the clearance from 20-4-94, as the Asstt. Commissioner himself says it is clearance up to 25-4-94 that are to be excluded.
8. The Commissioner (Appeals)'s conclusion that, because the benefit of Modvat credit was not available prior to 20-5-94, the benefit of the exemption contained in the notification could not be availed of prior to this date is not, in our view, correct. It is necessary to examine this aspect in greater detail. Prior to its amendment on 20-5-94, Clause (1) of Paragraph 4, which relates to first clearance of Rs. 30 lakhs provided that in a case where the manufacturer avails of Modvat credit under Rule 57A, or under Rule 57Q, the duty payable would be equivalent to the amount calculated at 10% ad valorem. No doubt, the textured yarn became eligible for Modvat credit from 20-5-94. Between 25-4-94 and 20-5-94, therefore the exemption could not be claimed in respect of textured yarn under Clause (1) and could not claim only with regard to Clause (2). We however do not see how this leads to clearance before 20-5-94 not being included. During this period, the manufacturer of textured yarn, could if he chose to avail of the exemption by not paying the duty on the yarn at all at the first clearance of Rs. 30 lakhs. The fact that the second option was not available to him does not mean that it does not have any significance in the issue before us. It only means that the two alternative exemption were not available to these goods. It does not follow from that it is only from the date on which the exemption became available.
9. We do not find any substance in the department's claim that it is clearances from 1-4-94 that should be included. We had requested Mr. M.H. Patil, Advocate to assist us in the matter, he cites two decisions. The first which was also referred to by the Departmental Representative is Garlon Polyfab Inds. Ltd. v. CCE - 2000 (120) E.L.T. 439. In this decision, the Northern Bench of the Tribunal has said that Notification 90/94 as amended 1/93 so as to include textured yarn in the list of specified goods will be applicable prospectively from the date of issue i.e. 25-4-94. It said however, in computing the aggregate value of clearance, since the notification refers to the first clearance it is the clearance from 1-4-94 that is to be included. This is the decision that the Departmental Representative relies upon.
10. The other decision is of the Chennai Bench of the Tribunal in CCE v. Selammal Spinners - 1998 (104) E.L.T. 685. In this decision, the Tribunal had applied the ratio of the decision of Watts Electronics v. CCE - 1994 (70) E.L.T. 127 and unreported decision in CCE v. Sri Kumaran Spinners has proceeded on the reasoning that cotton yarn became "specified goods" under the notification only on 25-4-94. Clearance of cotton yarn prior to this date is not specified goods and therefore should not form part of the aggregate value of the specified goods referred to in Paragraph A of the notification.
11. Normally, it would require us in a situation of this kind where there are two contradictory decisions for consideration for a Larger Bench. However, we have concluded that the decision in Carlon Polyfab Inds. Ltd. has been rendered per incuriam of provisions of law. The decision has not taken note of the fact that it is the first clearance of the "specified goods" that is to be taken in determining the aggregate value. The "specified goods" are the excisable goods of the description specified to the annexure to the notification. Prior to 25-4-94 textured yarn was not specified in the annexure and therefore was not specified goods. The view of the Chennai Bench that it is only the specified goods whose value is to be taken into account. It is thus correct and following that view, we hold that clearance period from (sic) 25-4-94 are not to be included in computing the aggregate value of the clearance.
12. As we have noted, the orders of the Asstt. Commissioner appears to be contradictory. Therefore it will be necessary to apply this principle and determine the duty, if any, payable by each manufacturer. The appeals are therefore allowed and the matter is remanded to the Asstt. Commissioner. Me shall apply the principles that we have enumerated above and determine the duty if payable, by each manufacture and communicate. The Bench records its appreciation on the assistance that Mr. Patil has rendered to it.