Customs, Excise and Gold Tribunal - Mumbai
Reliance Industries Ltd. vs Commr. Of C. Ex. & Cus. on 23 August, 2002
Equivalent citations: 2002ECR327(TRI.-MUMBAI), 2003(152)ELT423(TRI-MUMBAI)
ORDER G.N. Srinivasan, Member (J)
1. This appeal has been filed against the decision of the Commissioner (Appeals), Ahmedabad made in Order-in-Appeal 334/2001 dated 9-7-2001 confirming Order-in-Original passed by the Asst. Commissioner. In the Order-in-original, the Asst. Commissioner denied the benefit of exemption claiming under notification 4/97 as amended from time to time. He confirmed the duty of Rs. 7,22,65,367/-and imposed a penalty of Rs. 50 lakhs under Rule 173RQ of the Central Excise Rules.
2. The appellant has three separate units, distinctly registered with the excise department situated at (a) Naroda near Ahmedabad in Gujarat (b) Hazira near Surat in Gujarat; and (c) Patalganga near Mumbai in Maharash-tra. The appellant manufactured Partially Oriented Yarn (POY) falling under Chapter Heading 5402.42. Naroda unit and unit of appellant does not manufacture and it does not have the facilities (including plant and equipment) to manufacture such POY or single yarn falling under Chapter sub-heading 5402.42. The present appeal is in respect of the Naroda unit. It is the case of the appellant that part of the POY so manufactured at Patalganga and Hazira units are cleared on payment of full duty (aggregating 34.5% ad valorem) and are received at Naroda unit. The said full duty paid POY or single yarn is then utilised by the Naroda unit for texturising. The said texturised yarn is either (i) cleared on payment of appropriate duty for sale, or (ii) cleared for export under bond; or (iii) consumed captively for manufacture of fabrics availing of applicable exemptions without payment of duty; or (iv) cleared on payment of appropriate duty for twisting and/or dyeing. The various operations are duly recorded in the statutory records maintained by the appellants in excise records. The department felt that there has been certain violation of the Central Excise Act and Rules, is failed to mention in the classification list therefore the appellant could not have claimed the exemption notification 4/97 as amended from time to time. It resulted in the issuance of five show cause notices. One such show cause notice is dated 12-8-97 wherein i^ said as follows:
"They have seek classification of these products under subheading Nos. 5402.32 & 5402.5 of Central Excise Tariff Act, 1985 respectively. In the said classification declaration, they have claimed benefit of exemption for both these products in view of Notification No. 4/97, dated l-3-97 as amended vide Notification No. 19/97, dated 11-4-97 and further amended vide Notification No. 34/97 dated 6-6-97.
Whereas it appears that they intent to avail benefit of exemption for both these products as per entry No. 116A of that original Notification No. 4/97 after subsequent amendment. Whereas it also appears that the description as shown in Col. 3 of the Notification is as under :-
"Dyed oriented blenched or mercersided yarn, whether single, multiple (folded) or cabled manufactured in a factory which does not have the facilities (including plant and equipment) for producing single yarn."
The explanatory note given in H.S.N. pertaining to yarn speaks as under :-
(1) General :- Textile yarns may be single, multiple (folded) or cabled. For the purposes of this nomenclature :-
(a) Single yarn means yarns composed either
(b) Stable fibres, usually held together by twist (spun yarns) or of
(c) One filament (monofilament) of heading 54.07 to 54.05 or two or more filaments (multifilment) or heading 54.02 or 54.03 held together with or without twist (continuous yarn).
It is observed that the party has not declared whether they have the facilities (including plant and equipments) for producing single yarn. From the earlier classification lists filed by the party from time to time. It is observed that M/s. Reliance Industries Ltd., Ahmedabad have the facilities (including plant and equipment's) for producing single yarn. They also manufacture single yarn composed stable fibres, usually have together by twist (spun yarn). They also manufacture single yarn composed either one filament monofilament of heading 54.02 or yarn of two or more filament (multifilament) of heading 54.02 or 54.03 held together with or without twist (continuous yarn) Further it also appears that undyed polyester filament yarn used captively for further manufacture of dyed polyester filament yarn is exempted from whole of duty of excise by virtue of Notification No. 67/95-C.E., dated 16-3-95 once a product/commodity is exempted from whole of duty of excise the assessee is not permitted to pay Central Excise Duty on such exempted product/commodity on their own volition. And if they pay willingly such duty. It may be treated as deposit of duty and not duty charged or paid in view of Section 3 of Central Excise Act, 1944.
From the facts, narrated above, it is observed that the exemption as claimed by the party is not at all admissible to them and hence the classification declaration of dyed, printed, bleached or mercerised yarn. Whether single, multiple (folded) or cabled yarn manufactured by M/s. Reliance Industries Ltd. Ahmedabad is required to be revised to the extent that the duty at the rate of 30% ad valorem. (BED) + 15% of BED (1 & 1 A) is required to be levied on said yarn instead of Rs. 6 per kg. in view of entry No. 116A of Notification No. 4/97, dated 1-3-97 as amended from time to time".
3. The appellants filed its replies to various show cause notices contending inter alia that the claim of exemption under the notification 4/97 as amended from time to time is in order. The case of the appellant is the entire matter has to be looked into by looking into the amendments made to the said Notification 4/97 under Notifications 19/97 and 34/97. The stress of the appellants case is that when we are looking into the interpretation of item 116A as mentioned in Notification 19/97, the effect of the dropping of the words "or twisted or texturised yarn" and continuance of the same in item 116B than we have proper perspective.
4. The senior Counsel for the assessees argues before us vehemently that the observations of the appellate authority "in fact vide Notification 34/97 -C.E., dated 6-6-97 at serial number 116A the term "draw-twisted or textured yarn" were deleted which appear after single yarn as it was a single yarn only. This ld. Counsel says is wrong. He says as mentioned earlier that the interpretation of the items in the same notification namely 116A and 116B have to be read into in a harmonious way to come where to the correct interpretation of the notification. Ld. Counsel also argues that as far as reliance of HSN is concerned by the appellate authority and finding of the appellate authority that since the appellants produced textured yarn in the factory in which they were undertaking the process of dyeing, so they have the facility of producing single yarn in the factory is wrong. He also emphasised the fact that the appellate authority has wrongly interpreted the Board Circular No. 158/69/95-CX-I, dated 21-11-95. Ld counsel also challenged the finding of the appellate authority that the clarification of CBSE is not applicable to the facts and circumstances of this particular case. Counsel also showed Board Circular No. 125/36/95-CX dated 15-5-95 regarding the interpretation given by the Board as to the word appropriate duty. He also relies on the observation of the Supreme Court in the case of Collector of Central Excise, Vadodara v. Dhiren Chemical Industries - 2002 (139) E.L.T. 3. For this, observation in paragraph 6 of the judgment in the proposal that in the instant case, the appellants have paid full duty at the texturised stage. Therefore the said case helps the appellant's case.
5. As against this, ld. DR while reiterating the grounds made by the lower authorities, has said that the exemption notification should be viewed in a strict way. Relying on HSN, he states that a single yarn can be either twisted or texturised. As far as the inclusion of the words "draw twisted or textured yarn" in item 116B mentioned in notification 19/97 he had nothing to say but emphasises that the absence of the words in item 116A is with which we are concerned. He maintained that this words were redundant as observed by the Commissioner (Appeals). He also refers to definition of the word "textured yarn" defined in Me Graw Hill Dictionary as meaning "A generic designation for continuous filament manufactured yarns which are processed to give them a hand and appearance distinct from untreated yarn".
6. We have considered the rival submissions. The facts are very clear that the Naroda unit gets POY from Patalganga and Hazira units. It only texturised and dyes the said yarn. On each stage, they pay the duty, even though there were in existence some exemption notifications. This has not been denied in the show cause notice. The show cause notice only emphasises the fact that they have undyed polyester filament used captively for further manufacture of dyed polyester filament yarn is exempted from whole of duty of excise by virtue of notification 67/95. Once a product is exempted from whole of duty of excise the assessee is not permitted to pay Central Excise duty on such exempted product on their own volition, and if they pay willingly such duly, it may be treated as deposit of duty and not duty charged or paid in view Section 3 of Central Excise Act, 1944.
7. The case of the department factually may not be correct. It has been emphasised again and again by ld. Sr. Counsel for the appellant that they have paid the duty. The denial of exemption notification by the department is that duty ought not to have been paid and the amount paid is only a deposit. They have not relied on any judgment of the Tribunal but only on the Board circular. The department relies on the Board circular 2/91, dated 4-1-91 and they emphasise that the assessee has no option to pay duty on his own volition. In the instant case, the polyester filament yarn used captively is emphasised by the Id. Counsel that they have paid duty. No doubt he accepts that there is an exemption notification which he has not claimed. Once the party pays the amount, he pays it as duty only and he was not prepared to take the benefit of the notification. In that event, the situation emerges that there are two rates of duty, one appropriate under the Tariff Act and another appropriate under the exemption. The party can choose which rate he would be paying. This is what the Tribunal has held in the case of Bombay Dyeing Mfg. Co. - 2001 (135) E.L.T. 1392 at paragraph 7 where the Tribunal has held as follows:
"Is the rate of duty prescribed in the statute eliminated or nullified by grant of an exemption? The Supreme Court answered this question in Hico Products Ltd. v. CCE - 1994 (71) E.L.T. 339. It said that "Such exemption by means of notification issued under Rule 8 (of the Central Excise Rules) does not take away the levy or have the effect of erasing duty. The object of the exemption notification is to forgo the duty and confer certain benefits upon the manufacturer or a buyer, or the consumer through the manufacturer, as the case may be". The same view that because of an exemption levy of duty of an article is for scrapped, was expressed by the Andhra Pradesh High Court in Andhra Pradesh Paper Mills Ltd. v. ACCE - 1980 (6) E.L.T. 210 and by the Orissa High Court in Mamta Drinks and Industries Ltd. v. ACCE - 1987 (30) E.L.T. 224. It would then follow that when there is an exemption granted to an article, there are two rates of duty leviable. One, a rate prescribed by the statute, and secondly the rate granted by exemption notification, which in any case can not be equal to or more than the duty prescribed in the statute and always has to be less including nil".
8. We now go to the next point at page 235 of the paper book which deals with the finding of the Commissioner (Appeals). He has held as follows :
"It is, thus, clear that as per appellants own admission, they are undertaking the process of texturing the POY in the same factory in which the process of dying etc. is being undertaken. Based on this fact, let us see whether they have the facilities (including plant equipment) for producing single yarn. As per general explanatory notes under Section XI under the Heading "Yarns", single yarn has been defined as under :-
Single Yarn means yarns composed either of:
(a) Staple fibres, usually held together by twist (spun yarns) or of (b) One filament (monofilament) of headings 54.02 to 54.05, or two or more filaments (multifilament) of heading 54.02 or 54.03, held together, with or without twist (continuous yarns)
Seeing in the context of the above definition of single yarn, twisted or tex-tured yarn is also called single yarn. Since the appellants produced textured yarn in the factory in which they are undertaking the process of dyeing, etc., so they have the facility for producing single yarn in their-factory. Accordingly, they did not satisfy the condition (I) of the foregoing paragraph (7) for availing the benefit of Notification No. 4/97-Central Excise dated 1-3-97, as amended, therefore, are riot entitled to the benefit of said Notification".
9. Ld. Sr. Counsel states that the finding given by the Appellate Collector is wrong, He states that his clients fully satisfy the conditions mentioned in Notification 4/97. In Notification 4/97 it says:
116B 5402.32 Dyed, printed, bleached or mercerised yarns, whether single, multiple (folded) or cabled, manufactured in a factory which does not have the facilities (including plant and equipment) for producing single or draw twisted or texturised yarn (2) Against S. No. 116A, for the entry in column (3), the entry "Dyed, printed, bleached or mercerised yarns, whether single, multiple (folded) or cabled, manufactured in a factory which does not have the facilities (including plant and equipment) for producing single yarn" shall be substituted'.
10. The argument of the ld. Sr. Counsel is omission of the words "draw twisted or texturised yarn" in item No. 116A has to be read in conjunction with the continued use of the words in item 116B. It is correct that when we look into the statute whether it is an act or notification one has to look into the entire legal statutory instrument. Factually it is correct the words omitted namely "draw twisted or textured yarn" are absent in 116A with which we are concerned namely, the product is covered under Chapter Heading 5402.23 which is mentioned in 116A. In 116B also the same product under Chapter 5402.32 is mentioned. But yet, the same words are continued to be mentioned in item 116B. When that is the position, we cannot accept the argument of the lower authorities that conditions have not been accepted, inasmuch as the amount of duty has been paid which we have dealt with in the earlier portion of the order. The words mentioned above which are treated to be redundant in page 236 of the paper book cannot be accepted. The authority which enacts the law, be it a Parliamentary or Central Government which issue a notification under the Act exempting a product know why a particular word are used. We cannot unnecessarily term the words used there as redundant. No authority quasi judicial can state that a word used in notification has been made in a redundant way. The approach of the appellate Collector to us appears to be wrong on that score. We are therefore of the view that the entire approach of the both lower authorities are wrong in law and fact. We are therefore of the view that the impugned order should be set aside and we do so while allowing the appeal.
11. Appeal stands allowed.