Custom, Excise & Service Tax Tribunal
M/S. Sports And Leisure Apparel Ltd vs Cce, Noida on 24 February, 2010
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No. 2, R.K. Puram, NEW DELHI COURT No. I CENRAL EXCISE APPEAL NO. 1158 OF 2005 [Arising out of Order-in-Appeal No. 5-CE/APPL/NOIDA/2005 dated 27.1.2005 passed by the Commissioner (Appeals), Central Excise, Noida] Dated of hearing/decision: 24th February, 2010 For approval and signature: Honble Mr. Justice R.M.S. Khandeparkar, President; Honble Mr. Rakesh Kumar, 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 would 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. Sports and Leisure Apparel Ltd., Appellants Vs. CCE, Noida Respondent Appearance: Shri B.L. Narasimhan, Advocate for the appellants; Shri Sunil Kumar, Authorised Representative (DR) for the Revenue Coram: Honble Justice R.M.S. Khandeparkar, President; Honble Mr. Rakesh Kumar, Member (Technical) ORAL ORDER NO._________________ dated __________
Per JUSTICE R.M.S. KHANDEPARKAR:
Heard.
2. This appeal arises from order dated 27.1.2005 passed by the Commissioner (Appeals), Central Excise, Noida. By the impugned order the appeal filed by the appellants against order passed by the Adjudicating authority has been dismissed. The Adjudicating authority by his order dated 30th June, 2004 had confirmed the demand of Rs. 8,80,370/- against the appellants along with interest thereon and penalty of equal amount.
3. The appellants are engaged in the manufacture of knitted fabrics of cotton classifiable under Chapter Sub-heading 6001.11 and 6002.92, and articles of apparel knitted or crocheted all sorts classifiable under Chapter Sub-heading 6102.00 of Central Excise Tariff Act, 1985. They are also manufacturing accessories classifiable under Chapter Sub-heading No. 6202.00 of the Schedule to the said Act.
4. The appellants had purchased duty paid yarn and used the same for manufacturing knitted or crocheted fabrics classifiable under Chapter Sub-heading 6001.11 and 6002.92 attracting duty @ 16% ad valorem. Scrutiny of their ER-1 Return for the period from December, 2002 to March, 2003, revealed that they had not paid the duty on knitted or crocheted fabrics manufactured and cleared by them nor they had shown production/clearance details of such knitted or crocheted fabrics in their ER-1 Returns. They had used knitted/crocheted fabrics for further manufacture of ready-made garments classifiable under Sub-heading 6101.00 of the Central Excise Tariff Act attracting duty @ 16% ad valorem. However, no duty was paid on clearances of such ready-made garments. Pursuant to the investigation, a show cause notice dated 7.1.2002 was issued requiring the appellants to show cause as to why duty amounting to Rs. 29,98,752/- payable on clearance of garments and knitted or crocheted fabrics of Rs. 1,87,42,200/- during the period from December, 2002 to March, 2003 should not be demanded under Section 11A of the Central Excise Act, 1944 along with interest thereon in terms of Section 11AB of the said Act and penalty under Rule 25 of the Central Excise Rules, 2002. Proceedings were contested by the appellants and the Adjudicating authority after considering the material placed on record dropped the proceedings in relation to the demand of Rs. 21,18,382/- and confirmed the demand for an amount of Rs. 8,80,370/- along with interest thereon and penalty of equal amount of duty. Appeal against the same did not yield favourable result to the appellants, except in relation to the penalty.
5. Learned Advocate appearing for the appellants, while fairly conceding that the main issue which is sought to be raised by the appellants stands concluded by the earlier decision of the Tribunal in the appellants own case in appeal No. 251 & 252 of 2004 disposed off by the Tribunals Final Order No. 1239-1240/2004-NB(A) dated 11.11.2004 and the said matter is presently before the Apex Court, did not press for the same point in this case, while reserving the right of the appellants to raise the same point in case the appellants happen to take the matter before the Honble Apex Court.
6. Undoubtedly, the main issue which arises in the matter in hand is whether the benefit of exemption under notification No. 15/2002-CE dated 1.3.2002 is available to the appellants in relation to knitted garments manufactured by them during the period from December, 2002 to 5.1.2003? As far as the point relates to non-entitlement of benefit under the said notification on account of utilization of one of the inputs which had been exempt from payment of duty, the same stands concluded by the decision in the appellants case itself which is presently before the Apex Court. So, it is not necessary to deal afresh with the same in the case in hand.
7. Learned Advocate for the appellants, however, stated that pursuant to the decision in the earlier matter the appellants paid the duty amount which was payable in relation to the input utilized for manufacture of final product and on the basis of such payment the appellants had claimed the benefit of exemption of payment of duty under the said notification which has been rejected by the authorities below not because of the exemption notification does not permit such benefit but only because of the decided case on such point. In this regard attention is drawn to the decision of the Commissioner (Appeals), particularly to para 18 & 19 of his order. Drawing our attention to the decision in Formica India vs. CCE, reported in 1995 (77) ELT 511, the learned advocate submitted that mere lapse of time in clearing the liability cannot be a ground to deny the benefit of exemption once it is not in dispute that the statutory liability in relation to the duty on the input has been cleared by the assessee. He further submitted that the fact that the duty liability in relation to the inputs having been cleared by the appellants is not being in dispute, mere delay in clearance of that liability cannot come in the way of availing the benefit under the said notification as the notification on the face of it nowhere provides that such duty should be cleared prior to claiming the benefit.
8. Learned D.R. on the other hand drawing our attention to the decision in the matter of CCE, Mumbai-I vs. Bombay Dyeing & Mfg. Co. Ltd., reported in 2007 (215) ELT 3 (S.C.), State of Jharkhand vs. Ambay Cements and Eagle Flask Industries Ltd. vs. CCE, Pune, reported in 2004 (171) ELT 296 (S.C.) submits that the duty is to be paid when it is due otherwise it cannot be said that the duty liability has been lawfully cleared and in case of excise duty the same has to be paid on the clearance of the goods. Once it is not in dispute that the duty liability in relation to input was not paid even prior to the consumption of the input in the manufacture of final product, it cannot be said that the duty liability was discharged in time so as to enable the appellants to avail the exemption benefit under the said notification.
9. The condition No. 4 of the notification reads thus:
If made from knitted or crocheted textile fabrics, whether or not processed, on which the appropriate duty of excise leviable under the First Schedule to the said Central excise Tariff Act and the Additional Duties of Excise (Goods of Special Importance) Act, read with any notification for the time being in force or the additional duty of customs leviable under section 3 of the Customs Tariff Act, 1975, as the case may be, has been paid and no credit of the duty paid on inputs or capital goods has been taken under rule 3 or rule 11 of the CENVAT Credit Rules, 2002.
10. A perusal of the decision of the Apex Court in Formica India Division case reveals that when it is found that the assessee though were liable to pay duty on intermediate product prior to its utilization in the final product but had not paid the same, however, they had paid the same on the end product, it cannot be said that they could not ordinarily have complied with the requirement of payment of duty prior to utilization of the product. It was also observed that once the Tribunal took the view that they were liable to pay the duty on intermediate product and they would have been entitled to the benefit of the notification had they met with the requirement of Rule 56A, the proper course was to permit them to do so rather than denying to them the benefit on the technical ground that the point of time when they could have done so had elapsed and they could not be permitted to comply with Rule 56A after that stage had passed. The Apex Court in Eagle Flask Industries Ltd. case clearly ruled that for availing benefits under an exemption Notification, the conditions have to be strictly complied with. Undoubtedly, the Apex Court was referring to the condition of the notification. In the case in hand, we are dealing with the notification which clearly prescribes certain conditions as quoted above in order to enable the assessee to claim the benefit thereunder. The plain reading of the above condition discloses that in order to claim the benefit of notification, it is necessary that the manufacturer should have paid the duty on the inputs which are required to be utilized for the manufacture of final product and should not avail the credit of any such duty paid on inputs or capital goods. In the case in hand, it is not in dispute that the appellants had not paid the duty in relation to one of the inputs utilized for the manufacture of the final product. Duty thereon was paid only after the decision of the Tribunal. Being so, the fact that duty was not paid at the time of clearance of the inputs being clearly established as also the fact that one of the inputs used in the manufacture of the final product so having been cleared would certainly amount to non-compliance of the condition No. 4 of the notification. The time factor of the payment of duty cannot be said to be a mere technical matter. Condition No. 4 clearly refers to lawful clearance of duty on the inputs.
11. The decision in the matter of Ambay Cements also lend support to the contention made on behalf of the respondents. In Bombay Dyeing & Mfg. Co. Ltd. case the Apex Court had clearly held that when we come to the Exemption Notification No. 14/2002-CE, the requirement was that exemption on grey fabrics was admissible subject to the assessee paying duty on yarn before claiming exemption and subject to the assessee not claiming CENVAT credit before claiming the exemption. Question of exemption from payment of duty on grey fabrics arose on satisfaction of the said two conditions. In this case, payment of duty on yarn on deferred basis took place before clearance of grey fabrics on which exemption was claimed. Therefore, payment was made before the stage of exemption. Similarly, on payment of duty on the input the assessee got the credit which was never utilized. That before utilization, the entry has been reversed which amounts to not taking credit. Hence, in this case, both the conditions are satisfied. This ruling discloses that the conditions which are required to be complied with in relation to the input utilized for final product to enable the final product to be eligible for exemption benefit under the notification, the obligation in relation to the input are necessarily required to be complied with before the input goes for utilization in the final product. In the case in hand, the payment of duty having been made subsequently, it cannot be said that condition regarding payment of duty before utilization of inputs was satisfied, and therefore, the benefit thereunder was rightly refused to the appellants.
12. Learned Advocate, however, justified in contending that reasoning given by the Commissioner (Appeals) in order to justify the rejection of the benefit to the appellants is unwarranted as mere absence of case law cannot be a ground to reject a contention raised by the party.
13. It is not necessary to deal with the issue of non-entitlement of benefit under notification No. 15/2002-CE on account of utilization of one of the inputs which has been exempt from payment of duty as the same stands settled in the earlier decision in relation to the appellants own case which is now the subject matter before of challenge the Apex Court. In any case, if the appellants challenges the present decision before the Apex Court the said issue would also be available to the appellants to be raised before the Apex Court. For the reasons stated above, the appeal fails and is thereby dismissed.
(JUSTICE R.M.S. KHANDEPARKAR) PRESIDENT (RAKESH KUMAR) MEMBER (JUDICIAL) Dated 2nd March, 2010 RK 9