Custom, Excise & Service Tax Tribunal
U P State Spinning Company Ltd vs Allahabad on 5 July, 2018
+IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
REGIONAL BENCH : ALLAHABAD
COURT No. I
APPEAL No.E/52091/2014-EX[DB]
(Arising out of Order-in-Original No. MP (Dem.42/2012) 11/2013 dated
25/11/2013 passed by Commissioner of Central Excise & Service Tax,
Allahabad)
M/s U.P. State Spinning Company Ltd. Appellant
Vs.
Commissioner of Central Excise & S.T., Allahabad Respondent
Appearance:
Ms Reena Khair, Advocate for Appellant Shri Sandeep Kumar Singh, Deputy Commissioner (AR), for Respondent CORAM:
Hon'ble Smt. Archana Wadhwa, Member (Judicial) Hon'ble Mr. Anil G. Shakkarwar, Member (Technical) Date of Hearing : 05/07/2018 Date of Decision : 05/07/2018 FINAL ORDER NO-71466 / 2018 Per: Archana Wadhwa After hearing both the sides duly represented by Ms Reena Khair, Advocate for appellant and Shri Sandeep Kumar Singh, Deputy Commissioner (AR) for revenue, we find that the appellant is a U.P. State Government undertaking, engaged in the manufacture of cotton yarn and synthetic yarn falling under Chapters 52 and 55 of the Schedule to the Central Excise Tariff Act, 1985. The appellant filed classification declaration claiming benefit of Notification 2 APPEAL No.E/52091/2014-EX[DB] No.5/98-CE dated 2nd June, 1998 and 5/99-CE dated 28th February, 1999, which wholly exempted goods falling under headings 5205.11, 5205.19, 5206.11 or 5206.12, from the payment of duty, subject to the condition that they were purchased by a registered Apex Handloom Cooperative Society, the National Handloom Development Corporation or a State Government Handloom Development Corporation and the payment for which is made by cheque drawn by such Cooperative or Corporation on its own bank account. This exemption is also subject to the production of a certificate from the authorized officer of the Handloom Cooperative Society, National Handloom Development Corporation or State Government Handloom Development Corporation, as the case may be, that the yarn is going to be used only on handlooms.
2. The National Handloom Development Corporation, Lucknow (hereinafter referred to as NHDC) placed orders on the appellants for supply of cotton yarn falling under heading 5205.11. In the purchase order there were dispatch instructions indicating the name of the society to whom delivery was to be made. The appellants were also to arrange the transportation for the place of delivery on a "to pay basis". The bill for the goods was to be sent to the General Manager, NHDC, Lucknow. The payment for the goods was made by a cheque/draft of the NHDC in favour of the appellants. The 3 APPEAL No.E/52091/2014-EX[DB] appellant had also obtained subsequently certificates from NHDC confirming that the cotton yarn had been purchased by them on behalf of the society whose name had been mentioned in the purchase orders and that the cotton yarn had been used for handloom production.
3. During the period June, 1998 to January, 2000, the appellant cleared cotton yarn to various societies under the order of NHDC and received payments by way of cheque by the said NHDC. As the appellant had not produced the certificate from NHDC, as required in the notification, at the time of clearance of the goods and as per the investigations conducted by the revenue, the society to whom the yarn was tendered, were not found to be at the address given in the bills, proceedings were initiated against the appellant by way of issuance of show cause notice dated 14.07.2003 proposing to confirm demand of duty Rs.56,87,662.66/- along with confirmation of interest and imposition of penalty in respect of the yarn cleared during the period from August, 1998 to January, 2000.
4. It is seen that the said show cause notice culminated into an order passed by the Commissioner vide which he confirmed the demand along with interest and penalty. The said order was appealed against before the Tribunal, who vide their Final Order No.101/2005-NB © dated 12.01.2005 observed that inasmuch as the certificates were produced 4 APPEAL No.E/52091/2014-EX[DB] subsequently from NHDC, the condition of the notification stands satisfied and late production of the certificates cannot be held to be reason to deny the benefit of the notification. As regards the second ground, the Tribunal observed that admittedly orders for the supply of cotton yarn were placed by the NHDC and not by any individual society. The payments for these goods were made by the NHDC through the draft/cheque and not by the society to whom the goods were dispatched. The revenue's ground that two societies did not exist and that the other four societies did not utilize the goods on handlooms, have not been examined properly. The Tribunal also observed that the notifications in question do not cast duty on the appellants to see that the goods supplied to a particular society were utilized on handlooms. The appellants have produced additional evidence to prove that the societies, which are alleged to be non-existing, in fact, existed at the time of supply of the goods. By observing so the matter was remanded.
5. In remand proceeding the Commissioner again confirmed the demand and imposed penalty and on an appeal before the Tribunal, the matter was again remanded vide Final Order No.A/450/2012-EX (BR) dated 13.03.2012. The present impugned order stands passed by the Commissioner in denovo proceedings, confirming the demand to the extent 5 APPEAL No.E/52091/2014-EX[DB] of Rs.21,09,571/- and imposing penalty of an identical amount. The said order is appealed again before us.
6. The dispute in the present appeal revolves around benefit of Notification No.5/98-CE and 5/99-CE. In terms of said notifications yarn is to be supplied to various handloom societies on the basis of order placed by National Handloom Corporation, subject to fulfillment of condition numerated in the said notifications. Condition no.16 required production of certificate to that effect, which issue, raised by the revenue in the SCN, stands settled in favour of the appellant, vide the earlier order of the Tribunal. As such the only dispute remains, as to whether the yarn so supplied by the appellant was actually used by the societies or not.
7. As per the revenue's investigation such societies were either non-existence or non-utilized the yarn on handloom or had not received the full quantity of yarn. On going through notification, we find that such yarn was required to be supplied by the assessee on the orders of the National Handloom Corporation subject to production of certificate and the fact that the payment for the same stands made by cheque drawn by such Cooperative Society or Corporation, as the case may be, on its own bank account. Admittedly, both the conditions stand satisfied by the appellant, inasmuch as certificate stands produced and the consideration stands received by way of cheque. There is no further obligation cast 6 APPEAL No.E/52091/2014-EX[DB] upon the assessee to find out the truth, as to whether the yarn supplied by them to various societies, under the direction of the Apex body i.e. NHDC stands actually used by such societies on handloom. We further note that there is no requirement, in terms of the said notifications even on the part of the revenue to investigate the matter, as regards the actual use of the yarn by the said societies. As long as the two conditions are satisfied the benefit of the notification is available to the appellant.
8. An identical issue was considered by the Tribunal in the case of M/s West Dinajpur Spinning Mills Ltd. Vs Commissioner of Central Excise, Kolkata reported as 2006 (203) E.L.T. 474 (Tri.-Kolkata) wherein it was observed that there being no further condition as regards the disposal of purchased yarn by the Apex body, revenue's anxiety to reach the purchaser of the Apex body and the ultimate use of the yarn is beyond the scope of the notification. In any case we note that the appellants have strongly contended that enquiries at the societies address were made subsequently, thus leading to doubt about the same. As long as the appellants have fulfilled the conditions of notification and there being no further requirement in the said notification to verify the actual use of the yarn in question, we are not in agreement with the revenue's stand. It is also seen that the notification in question uses the expression "for use", which 7 APPEAL No.E/52091/2014-EX[DB] has to be interpreted as "intended to be used" and not actually used. As observed in the above referred decision of the Tribunal, wherever the notification intended to impose actual user condition, the same stands specifically mentioned in the notification. The yarn having been purchased by Apex body NHDC, it was their duty to see the fair distribution of the same to the handloom sector. No end use condition can be self introduced in the notification. In the absence of such requirement built in the notification inasmuch the certificate for intended use were issued, and further use of the same being in the hands of the Apex body, who are held responsible for distribution, the fact of actual use of the yarn will not effect the appellant's claim to the benefit of the notification. Such an extraneous condition cannot be imposed by the adjudicating authority on its own.
9. In view of the forgoing, we find no merits in the revenue's stand. Accordingly, the impugned order is set aside and the appeal is allowed with consequential relief to the appellant.
(Pronounced in Court)
(Anil G. Shakkarwar) (Archana Wadhwa)
Member (Technical) Member (Judicial)
akp