Custom, Excise & Service Tax Tribunal
70 2734/05 M/S Sunshine Dyeing Pvt. ... vs 71 187/07 M/S Ekta Dyeing & Finishing ... on 12 November, 2009
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No. 2, R. K. Puram, New Delhi-110066. COURT-I Date of hearing: 10/11.11.2009 Date of decision: 11-12.11.2009 For approval and signature: Honble Shri Justice R.M.S. Khandeparkar, President Honble Shri 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 should 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? Sl. No. Excise Appeal No. Name of the appellant Respondent Arising out of the order No. and date Passed by the
1 5814/04 Auro Textile CCE, Chandigarh OIO No. 54/CE/2004 dated 26.5.2004 CCE, Chandigarh 2 6016/04 M/s Friends Dyeing & Finishing Mills Pvt. Ltd. CCE, Ludhiana OIA No.580-602/CE/ APPL/Ldh/04 dt. 31.8.2004 Commissioner (Appeals) Central Excise, Ludhiana 3 6018/04 M/s Golden Enterprises -do- -do- -do-
4 6019/04 M/s Shree Balaji Processors -do- -do- -do-
5 6020/04 M/s Kudu Knit Process Pvt. Ltd. -do- -do- -do-
6 6022/04 M/s Jai Ganesh Processors -do- -do- -do-
7 6023/04 M/s Vikas ACS Industries -do- -do- -do-
8 6024/04 M/s Ess Aar Coating (India) Ltd., -do- -do- -do-
9 6025/04 M/s Mahavir Dyeing & Finishing Industries -do- -do- -do-
10 6026/04 M/s Raja Scientific Dyers -do- OIA No. 564/CE/Appeal/ Ldh/04 dt. 31.8.2004 -do-
11 6027/04 M/s Rama Dyeing House -do- OIA No. 580-602/CE/APPL/ Ldh/04 dt. 31.8.2004 -do-
12 6028/04 M/s Shree Krishna Industries -do- -do- -do-
13 6029/04 M/s Sangat Dyeing House -do- -do- -do-
14 6030/04 M/s Golden Processors -do- -do- -do-
15 6031/04 M/s Maharaja Dyeing & finishing Mills -do- -do- -do-
16 6032/04 M/s M.K. Processing -do- -do- -do-
17 6033/04 M/s Adinath Dyeing & Finishing Mills -do- -do- -do-
18 6034/04 M/s Yogi Dyeing Ltd. -do- -do- -do-
19 6035/04 M/s National Scientific Dyers -do- -do- -do-
20 6036/04 M/s National Scientific Dyers -do- -do- -do-
21 6037/04 M/s Bharat Jiwan Dyeing Factory -do- -do- -do-
22 6038/04 M/s Barkat Dyeing -do- OIA No. 559-562/CE/Appeal/Ldh./04 dt. 31.8.2004 -do-
23 6039/04 M/s Raja Scientific Dyers -do- -do- -do-
24 6040/04 M/s Anmol Dyeing and Finishing Mills -do- -do- -do-
25 6041/04 M/s Oswal Dyeing & Finishing Mills -do- OIA No. 565-579/CE/Appeal/ Ldh/04 dt. 31.08.2004 -do-
26 6042/04 M/s Paramount Processors -do- -do- -do-
27 6043/04 M/s Pawan Dyeing & Finishing Mills -do- -do- -do-
28 6044/04 M/s Mahesh Dyeing House -do- -do- -do-
29 6192/04 M/s Gulab Hosiery -do- OIA No. 580-602/CE/APPL/Ldh/04 dt. 31.8.2004 -do-
30 88/05 M/s Rameshwar Processors -do- OIA No. 565-579/CE/Appeal/ Ldh/04 dt. 22.09.2004 -do-
31 89/05 M/s Rameshwar Bulking Works -do- -do- -do-
32 226/05 M/s New Bombay Dyeing & Bleaching House -do- -do- -do-
33 344/05 M/s Ess Aar Coating (India) Limited -do- O-I-O No. 68-72/Ldh/04 dated 2.11.2004 Comm. Of Central Excise, Ludhiana 34 345/05 M/s Ganpati Industries -do- -do- -do-
35 346/05 M/s Suvidhi Costyn -do- -do- -do-
36 347/05 M/s Hi-Tech Dyeing and Finishing Mills Pvt Ltd., -do- -do- -do-
37 356/05 M/s Ashoka Dyeing and Finishing Mills Pvt. Ltd. -do- -do- -do-
38 357/05 M/s Ashoka Dyeing and Finishing Mills Pvt. Ltd. -do- O-I-O No. 73-80/Ldh/04 dated 3.11.2004 Comm. Of Central Excise, Ludhiana 39 358/05 M/s Kudu Knit Process Pvt. Ltd., -do- -do- -do-
40 359/05 M/s Ganapati Industries -do- -do- -do-
41 360/05 M/s Om Processors -do- -do- -do-
42 361/05 M/s Gulab Industries Pvt Ltd., -do- -do- -do-
43 362/05 M/s Dashmesh Weaving and Dyeing Mills Pvt. Ltd. -do- -do- -do-
44 363/05 M/s Hi-Tech Dyeing and Finishing Mills Pvt. Ltd. -do- -do- -do-
45 364/05 M/s Oriental Textile Processing Co. Pvt. Ltd., -do- -do- -do-
46 388/05 M/s Gulab Dyeing -do- O-I-O No. 81-87/Ldh/04 dt. 3.11.2004 -do-
47 389/05 M/s Kaushal Finishing -do- -do- -do-
48 390/05 M/s Ramal Industries -do- -do- -do-
49 391/05 M/s Shiroga International Pvt. Ltd., -do- -do- -do-
50 392/05 M/s Amar Industries Limited -do- -do- -do-
51 393/05 M/s PVM Enterprises -do- -do- -do-
52 394/05 M/s Maharaja Processors -do- -do- -do-
53 507/05 M/s Satgur Processors -do- O-I-A No. 565-579/CE/Appeal/ Ldh/04 dt. 22.09.2004 Comm (A) Central Excise, Ludhiana 54 1111/05 M/s Kakkar Dyeing House -do- O-I-A No. 664 /CE/ Appeal/Ldh/04 dt. 31.12.2004 -do-
55 1138/05 M/s G.L. Dyeing & Finishing House -do- O-I-A No. 565-579/CE/Appeal/ Ldh/04 dt. 31.08.2004 -do-
56 1204/05 M/s PVM Enterprises
-do- O-I-O No. 90-98/Ldh/04 dt. 10.1.2005 CCE, Ludhiana 57 1205/05 M/s Shiroga International Pvt. Ltd., CCE, Ludhiana -do- -do-
58 1206/05 M/s Gulab Dyeing -do- -do- -do-
59 1207/05 M/s M.K. Processing -do- -do- -do-
60 1208/05 M/s Amar Industries Limited -do- -do- -do-
61 1209/05 M/s Ramal Industries -do- -do- -do-
62 1210/05 M/s Maharaja Processors -do- -do- -do-
63 1211/05 M/s Perfect Dyeing -do- -do- -do-
64 1342/05 M/s Perfect Dyeing -do- O-I-O No. 01-03/Ldh/05 dt. 25.1.2005 CCE, Ludhiana 65 1629/05 M/s A.K. Dyeing -do- O-I-A No. 565-579/CE/Appeal/ Ldh/04 dt. 31.08.2004 Comm (A) Central Excise, Ludhiana 66 2729/05 M/s Sanmati Udyog -do- O-I-A No. 258-267/CE/Appeal/Ldh/05 dt. 16.5.2005 CCE, Ludhiana 67 2731/05 M/s Fine Way Processors -do- -do- -do-
68 2732/05 M/s Super Processors -do- -do- -do-
69 2733/05 M/s Delux Fabric Limited -do- -do- -do-
70 2734/05 M/s Sunshine Dyeing Pvt. Ltd., -do- -do- -do-
71 187/07 M/s Ekta Dyeing & Finishing House -do- O-I-A No. 79/CE/Appl/LDH/2006 dt. 31.10.2006 Comm (A) Central Excise Chandigarh Appearance:
Appeared for the Appellants Shri R. Santhanam, Sh. B.L. Narashimhan, Sh. Rupender Singh, Advocates & Shri Atul Gupta, Co. Secy.
Appeared for the Revenue Shri B.K. Singh, Jt. CDR, Sh. K.P. Singh, Shri P.K. Singh, DRs Coram: Honble Shri Justice R.M.S. Khandeparkar, President Honble Shri Rakesh Kumar, Member (Technical) Oral Order No.____________________ Per Shri Justice R.M.S. Khandeparkar:
Since common questions of law and facts arise in all these appeals, they were heard together and are being disposed of by this common order.
2. We have heard at length the learned Advocates for the assessees and the representatives of the Department for the respondents in all these matters. We have also perused the records with the assistance of the learned Advocates and the departmental representatives.
3. In all these cases the appellants challenge the orders passed by the lower authorities, original and appellate, denying the benefit of the Notification No. 14/2002-CE dated 01.03.2002 allegedly on misconstruction of the conditions attached to the said notification, including the Explanation No. II thereto.
4. In all these appeals one set thereof pertains to the processed cotton fabrics falling under heading 60.01 of the Tariff Act whereas other set of appeals relates to processed manmade fabrics falling under sub-heading 6002.93 of the Tariff Act. The authorities below relying upon the decision of the Apex Court in the matter of CCE vs. Dhiren Chemical Industries reported in 2002 (139) ELT 3 (SC) has denied the claim for exemption from the payment of duty and/or claim for concessional duty in terms of the said notification by the assessees. While confirming the demand in relation to duty liability of the assessees, the authorities below have also directed payment of interest and have also imposed penalty. Hence, the present appeals.
5. Drawing our attention to the impugned orders, the learned Advocates for the assessees submitted that the authorities below have heavily relied upon the decision of the Apex Court in Dhiren Chemical case ignoring the basic difference between the notification which was under consideration before the Honble Supreme Court in Dhiren Chemical case and the notification relevant for consideration in the case in hand. Referring to the expression read with any notification for the time being in force in the condition attached to the said notification, it was sought to be contended that no provision of the like nature was found present in the notification which was interpreted by the Apex Court in Dhiren Chemical case and that makes a lot of difference as far as the case in hand is concerned and also for the purpose of non applicability of the said decision to the matter in hand. The term appropriate duty was considered by the Apex Court in the facts and circumstances of the case before it in Dhiren Chemical case wherein the Apex Court had no opportunity to consider the scope of the above quoted expression as it was conspicuously absent in the notification which was under consideration before the Apex Court. Referring to the said expression, it is sought to be contended that the condition referring to the requirement of payment of the appropriate duty not only relates to the duty leviable under the Tariff Act but also to any notification for the time being in force and the same would include a notification granting either total or partial exemption from the payment of duty. Being so, according to the learned Advocates for the assessees, the conditions ex-facie would disclose that the benefit under the said notification can be availed even in relation to the textile yarn or fabrics which is totally exempt from the payment of duty. Even such a yarn or fabric would be a product deemed to have been cleared on payment of duty, though, the same has not been stated in so many words in the said conditions. Proper reading of the said conditions would reveal the same. It is their further contention that this is also evident from the explanatory notes to the Budget of 2002 and in that regard attention is drawn to the notes relating to chapter 50 to 63 of the said explanatory notes and specifically to the following paras:-
I - FIBRES AND YARNS The general excise duty structure on textile fibres and yarns remain unchanged at 8% (Cotton yarn, not containing any synthetic staples fibres or filament yarns and cotton sewing thread), 165 (Woollen yarn, flax yarn, man-made fibres, man-made filaments except Polyester filament yarn) and 32% (16% Cenvat + 16% SED Polyester filament yarn). However, in the case of cotton yarn supplied in hank form (plain /straight reel), the duty exemption has been withdrawn and these will be chargeable to duty @ 8% adv. on par with cotton yarn supplied in cone form. Similarly in the case of yarn of artificial staple fibres supplied in hank form (plan/ straight reel), the duty exemption has been withdrawn and these will be chargeable to duty @ adv. The above yarns, cleared on or after 1.3.2002 would attract the appropriate excise duty and would be eligible to avail of CENVAT credit on inputs lying in stock or in process or inputs contained in the final products lying in stock on 28.2.2002 [rule 3(2) of CENVAT Credit Rules, 2002 refers] All the above yarns and fibres will also be subject to additional excise duty of 15% of the cenvat or cenvat + SED under the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, except in the case of nylon tyre yarn which has been exempted from the said duty. (Sl. No. 5 of notification No. 11/2002-CE refers).
.
.
In the case of processed knitted fabrics of cotton, which were hitherto exempt from duty, an optional levy of 12% [8% Cenvat + 4% AED (ST(] has been prescribed. That is, if the manufacturer wants to avail cenvat credit of the duty paid on inputs (either on deemed basis or actuals basis) and capital goods (on actuals basis), he will be required to pay duty at 12% adv. [8% cenvat + 4% AED (ST)]. If he does not want to avail any credit on inputs and capital goods, he is not required to pay any duty. The rates of deemed credit for processed knitted fabrics of cotton are the same as applicable to processed woven fabrics.
In the case of goods falling under Chapter 59 and heading Nos. 58.07, 58.08, 58.09 and 58.10 of Chapter 58, the duty structure continues unchanged.
Notification Nos. 14/2002-CE and 15/2002-CE, both dated 1.3.2002 prescribes effective rates of duty of nil or 12% adv. in the case of textile fabrics subject to the condition that the goods should have been made from textile yarns or fabrics on which the appropriate excise duty or CVD has been paid. It may, however, be noted that Explanation II to the notification makes it abundantly clear that all fibres and yarns are deemed to have been duty paid even without production of documents evidencing payment of duty. Therefore, the manufacturer is eligible for the rates prescribed in the notification. The only condition that has to be satisfied is with regard to availment or non-availment of cenvat credit, as the case may be.
It is thus made clear that the benefit of the rate of duty should be allowed without insisting upon any documentary proof for payment of duty. However, if the manufacturer wants to avail cenvat credit of duty paid on inputs or capital goods on actual basis, he will be required to produce duty payment documents as prescribed the Cenvat credit rules.
It is, therefore, the contention on behalf of the assessees that even as per the understanding of the Government itself, the benefit under the notification is available irrespective of the fact whether the yarn and fabric has been actually subjected to the payment of duty or not and that is made further clear from Explanation II to the said notification.
6. It was further sought to be contended on behalf of the assessees that if the interpretation which is sought to be canvassed on behalf of the Revenue in relation to the said condition is accepted, then the whole object of the said notification would be defeated. Drawing our attention to the explanatory note, it was submitted that even prior to 2002, the knitted processed fabric was completely exempt from the duty liability. It was further submitted that the mean rate of excise duty leviable on any product in pursuance of the Budget of 2002 was only 12% and by process of interpretation, the Department is seeking to levy the duty @ 24% on the processed knitted fabrics. If the same is accepted would not only be contrary to the intention behind the notification disclosed from the explanatory notes to the Budget, but would also defeat the very purpose of the notification.
7. As regards the decision of the Apex Court in Dhiren Chemical case, apart from the differentiation between the notification which was under consideration before the Apex Court and the one in the case in hand, it is also sought to be contended that there was no explanation clause, as is found in the present case, available in the notification which was considered by the Apex Court in Dhiren Chemical case. Bearing in mind, this major difference, the observations of the Supreme Court in Dhiren Chemical case according to the Advocates for the appellants cannot be applied to the case in hand, more particularly, taking note of the phraseology of the notification in question. It is further contention on behalf of the appellants that while the judgement in Dhiren Chemical case was delivered on 12.12.2001, the notification in question came to be issued in March 2002. Being so, the Legislature and the Government were fully aware of the said decision of the Apex Court when the said notification was issued and precisely for the same reason, care was taken to clarify in the condition itself that the expression appropriate duty would also include the eventuality wherein the yarn and fabric is not subjected to the actual payment of the duty. It is also brought to the notice that since 1980, it has been the consistent stand of the Government that whenever the inputs are exempted from duty liability under a notification, they were always to be treated as duty paid inputs and that is evident from series of circulars issued by Central Board of Excise & Custom from 1980 to 1985 and in that regard attention is sought to be drawn to the decision of the Apex Court in CCE, Patna vs. Usha Martin Industries reported in 1997 (94) ELT 460 (S.C.). Attention is also drawn to the Circular dated 26.09.2002 issued by the Board withdrawing previous circulars and further issuance of the Circular dated 10.12.2002 in relation to the clarification on the point of rate of duty. In this regard, attention has also been drawn to the decision of the Tribunal in the matter of Morarjee Gokuldas Spg. & Wvg. Co. Ltd., vs. CCE, Mumbai reported in 2005 (190) ELT 217.
8. Further, attention is also drawn to the decision of this Tribunal in the matter of CCE, Ludhiana vs. Prem Industries reported in 2009 (168) ECR 0133 (Tri. New Delhi) while contending that similar issue was raised in the said case and same was answered in favour of the assessee.
9. Without prejudice to above arguments, it is also sought to be contended on behalf of the appellants that the Explanation II to the said notification clearly creates a fiction to the effect that for the purpose of compliance of the condition specified under the notification, textile yarn and fabric are to be deemed to have been subjected to the duty payment, without insisting for any documentary proof in that regard. The same lend clear support to the contention sought to be raised by the assessee and, therefore, according to the learned Advocates the authorities below clearly erred in denying the benefit under the said notification to the appellants. It is further contention on behalf of the appellants, that the legal fiction created under Explanation II deems the fabric and yarn to have been duty paid without even production of documents evidencing the payment of duty and such a legal fiction created thereunder being absolute one, while understanding the scope thereof full effect has to be given thereto. It is further contended that it is settled legal position that while considering the scope of a legal fiction, it would be proper and even necessary to assume of those facts on which alone make the fiction operative and following the observations in various reported cases, it should always be understood that whenever a statute requires one to imagine certain set of facts, while imagining such state of affairs, it is not permissible to have such imagination boggled down with unwarranted obstructions. In that regard, attention is drawn to the decision in the matter of Commissioner of Income Tax, Delhi vs. S. Teja Singh reported in 1959 SC 352 and Voltas Limited, Bombay vs. Union of India and Others reported in 2995 Supp (2) SCC 498. It is also sought to be contended that in case of interpretation, which is sought to be given to the explanation by the Department, is accepted it would virtually result in distortion of the explanation inasmuch as that it would result in re-writing the said explanation by introducing therein an exclusion clause in relation to the exempted yarn and fibre which has been subjected to nil rate of duty. According to the learned Advocates in that case the explanation would read as under that For the purposes of condition specified below, textile yarn or fabrics, except those which are fully exempt from duty or chargeable to nil rate of duty, shall be deemed to have been duty paid, even without production of documents evidencing payment of duty thereon. Such an interpretation would amount to go beyond the scope of the legal fiction sought to be created under the said provision and it will defeat the very purpose and object of the notification.
10. It is also sought to be contended that the most of appellants are independent job workers processing the gray fabrics procured from the open market and this fact is not in dispute. Denial of exemption would virtually result in levying and imposing duty @ 24% on such product when under the notification itself, even in case where the cenvat credit is availed, the maximum rate of duty is 12%.
11. On the other hand, learned representatives for the Department have submitted that the issues sought to be raised in the matter are clearly concluded by the decision of the Apex Court in Dhiren Chemical case. According to them the expression read with any notification for the time being in force in the condition attached to the notification cannot be construed in such a manner that it will defeat very purpose of the condition itself which clearly specifies the requirement of actual payment of duty. Attention is also drawn to the decision in the matter of Vareity Metals Pvt. Ltd. vs. Collector of Central Excise, Pune reported in 2004 (174) ELT 16 (SC) while contending that the similar issue has been clearly answered by the Apex Court against the assessee. Drawing our attention to the clauses relating to the conditions attached to the notification, it is sought to be contended that the expression read with any notification is to be understood with reference to the term appropriate duty .. has been paid by the party and cannot be extended to mean that it also relates to a situation where no duty is paid. According to the learned representatives, the situation wherein an assessee does not pay the duty or enjoys the benefit of a notification providing nil rate of duty, it would factually mean that the assessee has not been subjected to actual payment of duty relating to the relevant product. In this regard attention is also drawn to the Circular No. 667/58/2002-CX dated 26.9.2002.
12. Referring to Explanation II to the said notification and drawing our attention to the decision of the Apex Court in Khemka & Co. vs. State of Maharashtra reported in AIR 1975 SC 1549 and Bengal Immunity Co. vs. State of Bihar and Others reported in AIR 1955 SC 661, it is sought to be contended that the fiction which is created under the said explanation is limited for the purpose of conditions attached to the notification and it pertains to the proof of the payment of duty which cannot be extended to a totally different fiction in the nature of deemed payment in relation to the cases which do not include actual payment of the duty.
13. Attention was also drawn to the decision in the matter of CCE, Chandigarh vs. Dogra Distilleries (P) Ltd., reported in 2001 (137) ELT 887 (Tri. Del.), while contending that a legal fiction created for a specific purpose has to be understood within the specified limits and cannot be extended beyond the legitimate field. Attention is also drawn to the decision of the Apex Court in the matter of Motiram Tolaram vs. Union of India reported in 1999 (112) ELT 749 (S.C.) while contending that the expression in the exemption notification cannot be construed to enlarge the scope of the benefit under the notification. The Department has also sought to place reliance in the decision of the Tribunal in the matter of Sports & Leisure Apparel Ltd., vs. CCE, Noida reported in 2005 (180) ELT 429 (Tri. Del.) while contending that all the issues which are sought to be raised in the matter in hand stand answered by the said decision.
14. Learned Representatives of the Department have also submitted that the decision of the Tribunal in Prem Industries case (supra) was in relation to the composite mill and on the point of analysis of the board circular dated 10.12.2002 and being so, the same does not deal with the issues which are sought to be raised in the matter in hand and, therefore, is of no help to decide the cases in hand.
15. Upon hearing the learned Advocates and learned representatives of the Department following questions arise for consideration:-
i) Whether the conditions attached to the said notification provide that the benefit under the said notification can be availed in relation to the products which are subjected to actual payment of duty, and not otherwise?
ii) What is the scope of Explanation II to the said notification and whether the legal fiction created thereunder includes textile yarns and fabrics subjected to Nil rate of duty or those which are not subjected to the payment of duty?
16. At the outset, it is to be noted that the matters in hand relate to the interpretation of an exemption notification issued under a taxing statue. In such matters, it is settled law that the Courts and Tribunals are not expected either to enlarge or to restrict the scope of exemption benefit assured under such notification. It has been repeatedly reminded by the Apex Court that while interpreting a provision in a taxing statute, the question which should be asked is as to what does the provision of law states on plain reading thereof and what its language disclose according to its natural meaning and as is commonly understood. The Courts and Tribunals have to look squarely at the words of the statute and interpret them. They must interpret a taxing statute in the light of which is clearly expressed and it cannot imply anything what is not expressed. It cannot import a provision in a statute so as to supply any assumed deficiency therein. Bearing this in mind, we will have to analyse the rival contentions sought to be raised in relation to the questions which arise for consideration.
17. The first point relates to the condition attached to the said notification. In order to understand the exact import of the condition, it is necessary to take note of the entire notification itself. The notification in question is Notification No. 14/2002-CE dated 1.3.2002. The same reads as under:-
In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 11/2001-Central Excise, dated the 1st March, 2001, published in the Gazette of India vide number G.S.R. 136 (E), dated the 1st March, 2001, except as respects things done or omitted to be done before such supersession, the Central Government being satisfied that it is necessary in the public interest so to do, hereby exempts excisable goods of the description specified in column (3) of the Table below and falling within the Chapter, heading No. or sub-heading No. of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), specified in the corresponding entry in column (2) of the said Table, from so much of the aggregate of,
(a) the duty of excise specified in the First Schedule to the said Central Excise Tariff Act; and
(b) the duty of excise specified in the First Schedule to the said Additional Duties of Excise (Goods of Special Importance) Act, (hereinafter referred to as the aggregate duty) as is in excess of an amount calculated at the rate specified in the corresponding entry in column (4) of the said Table, subject to the relevant conditions specified below the said Table, and referred to in the corresponding entry in column (5) of the said Table :
Provided that the aggregate duty of sixteen per cent. ad valorem leviable on the excisable goods specified in S. No. 9 of the Table below shall be apportioned equally between the duty leviable under the said Central Excise Act and the said Additional Duties of Excise (Goods of Special Importance) Act :
Provided further that -
(a) during the period commencing from the 1st day of March, 2002 and ending on the 28th day of February, 2005, the aggregate duty in respect of the goods specified against S. Nos. 2, 3, 4, 5, 6, 7, 8, 11, 13, 15 and 16, shall be further exempted in excess of three-fourths of the rate specified in the corresponding entry in column (4) of the said Table; and
(b) during the period specified in clause (a) above, the duty leviable on the excisable goods specified therein, shall be apportioned in the ratio 2:1 between the duty leviable under the said Central Excise Act and the said Additional Duties of Excise (Goods of Special Importance) Act.
Explanation I. - For the purposes of this notification, the rates specified in column (4) of the said Table are ad valorem rates, unless otherwise specified.
Explanation II. - For the purposes of the conditions specified below, textile yarns or fabrics shall be deemed to have been duty paid even without production of documents evidencing payment of duty thereon.
Explanation III. - For the purposes of the exemption under S.No. 5 of the Table, -
(i) the expression independent processor means a manufacturer who is engaged exclusively in the processing of fabrics with the aid of power and who has no proprietary interest in any factory engaged in the spinning of yarn of cotton or weaving of cotton fabrics; and
(ii) the value of the fabrics shall be equal to 40% of the value determined under section 4 of the Central Excise Act, 1944.
Table S. No. Chapter or heading No., or sub-heading No. Description Rate of duty Cond- ition (1) (2) (3) (4) (5) 1 5110.10, 5111.10, 5207.20, 5208.20, 5209.10, 5406.10, 5407.10, 5511.10, 5512.10, 5513.10, 5514.10, 5801.11 or 5802.51 Woven fabrics, not subjected to any process Nil 1 2 5110.10, 5111.10, 5207.20, 5208.20, 5209.10, 5406.10, 5407.10, 5511.10, 5512.10, 5513.10, 5514.10, 5801.11 or 5802.51 Woven fabrics, not subjected to any process 16% 2 3 5207.10 or 5208.10 Denim fabrics, whether or not processed 16% 2 and 5 4 51.10, 51.11, 52.07, 52.08, 52.09, 54.06, 54.07, 55.11, 55.12, 55.13, 55.14, 5801.12, 5801.22, 5801.32, 5802.22, 5802.32, 5802.52 Woven fabrics, subjected to any process 16% 5 5 52.07,52.08 or 52.09 Cotton fabrics woven on handlooms and processed with aid of power or steam by an independent processor approved in this behalf by the Government of India on the recommendation of the Development Commissioner for Handlooms. 16% -
6 5801.21, 5801.31, 5802.21 or 5802.31 Woven fabrics, whether or not subjected to any process 16% 2 and 5 7 58.03 All goods 16% 2 and 5 8 5804.11 or 5804.12 All goods 16% 2 and 5 9 59.01 All goods 16% -
10 6001.11, 6001.21, 6001.91, 6002.42 or 6002.92 Knitted or crocheted fabrics of cotton, not subjected to any process Nil 1 11 6001.11, 6001.21, 6001.91, 6002.42 or 6002.92 Knitted or crocheted fabrics of cotton, not subjected to any process 16% 2 12 6001.11, 6001.21, 6001.91, 6002.42 or 6002.92 Knitted or crocheted fabrics of cotton, subjected to any process Nil 3 13 6001.11, 6001.21, 6001.91, 6002.42 or 6002.92 Knitted or crocheted fabrics of cotton, subjected to any process 16% 4 14 6001.12, 6001.22, [6001.92], 6002.20, 6002.30, 6002.43 or 6002.93 Knitted or crocheted fabrics, other than of cotton, not subjected to any process Nil 1 15 6001.12, 6001.22, 6001.92, 6002.10, 6002.20, 6002.30, 6002.43 or 6002.93 Knitted or crocheted fabrics, other than of cotton, not subjected to any process 16% 2 16 6001.12, 6001.22, 6001.92, 6002.10, 6002.20, 6002.30, 6002.43 or 6002.93 Knitted or crocheted fabrics, other than of cotton, subjected to any process 16% 5 Condition No. (1) Conditions (2) 1 If made from textile yarns on which the appropriate duty of excise leviable under the First Schedule or the Second Schedule to the said Central Excise Tariff 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.
2 If made from textile yarns on which the appropriate duty of excise leviable under the First Schedule or the Second Schedule to the said Central Excise Tariff 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.
3 If made from knitted or crocheted textile fabrics of cotton, 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.
4 If made from knitted or crocheted textile fabrics of cotton, 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.
5 If made from 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.
[Notification No. 14/2002-C.E., dated 1-3-2002]
18. As pointed out above, it has been strenuously argued on behalf of the assessees that the expression read with any notification for time being in force appearing in the condition attached to the notification would disclose that payment of appropriate duty which is stated in the said notification would include not only the duty at the rate specified under schedule of the Tariff Act but also as specified under any of the notifications issued under the said Act and it will also include a notification completely exempting the product from being subjected to duty. In other words, it would include the product which is either subjected to nil rate of duty or even for no duty liability.
19. Perhaps, the said expression any notification for the time being in force if read disjunctively, and independently of what is otherwise provided in the condition and sans the context in which it is used, then the contention sought to be canvassed on behalf of the assessee may seem to have some substance. The point, therefore, arises as to whether it could be so read. We can not forget that we are dealing with an exemption notification issued under a taxing statute. It is settled law that such notifications are to be strictly construed. While understanding the import of the condition attached to the notification in question and dealing with the argument advanced in that regard, it is to be noted that the condition does not merely refers to the duty which is leviable or payable under the Tariff Act or in terms of any notification issued thereunder, but it is qualified by the expressions like appropriate duty, leviable, under Tariff Act read with any notification and further by specific provision that has been paid. In other words the obligation contemplated under the condition does not stop by specifying that the appropriate duty as has been leviable and/or payable in accordance with the rate specified in the Tariff Act or any other notification issued in that regard, but it proceeds further to specify that such duty has been paid. The condition exfacie clearly requires actual payment of the duty. The condition itself nowhere speaks of any deemed payment. It requires factual payment of duty. A situation described by the words which reveal actual and factual payment of duty can not be presumed to include diametrical opposite situation.
20. As a rule, a phrase and/or sentence in a statute, including subsidiary legislation, is required to be interpreted according to its grammatical meaning. But the corollary to this rule that the relative and qualifying words, phrases and clauses are to be applied to the antecedent immediately preceding is also equally well settled law. The words in a statute are first understood in their natural, ordinary and popular sense and phrase and sentences are construed according to their grammatical meaning, unless it leads to some absurdity or unless there is something in the context to suggest the contrary. Bearing in mind this settled rules of interpretation, if one has to understand the correct meaning of the expression has been paid in the said condition, then on proper reading of the said condition, it would at once be clear that the said expression specifically clarifies the obligation prescribed under the said condition in relation to the duty liability to be required to be discharged by actual payment of the duty at the rate prescribed either under the schedule to the Tariff Act or under the notifications issued thereunder. In other words, the condition cannot be said to be complied with unless there is actual payment of duty. The condition does not merely provide that the obligation is merely to comply with in any notification including the exemption notification. But it specifically speaks of actual payment of duty. It is needless to say that actual payment of duty cannot, by any stretch of imagination, include non payment of duty, nor it can relate to a situation where the obligation regarding duty liability stands automatically discharged on account of benefit of notification prescribing nil rate of duty. The condition uses the expression has been paid. It does not either expressly or impliedly speaks of deemed payment. The condition does not create any legal fiction in that regard. It is also to be understood that the condition is attached to the exemption notification itself. In other words, to avail the exemption the pre-conditions specified thereunder are to be complied with. Viewed from this angle, it would be difficult to accept the contention on behalf of the assessees that the condition ex-facie discloses that the same includes the products which are subjected to nil rate of duty.
21. The above conclusion is inevitable and the same is also apparent from the later portion of the Condition No. 1 and 3. This later portion of the condition clearly speaks of disentitlement of the assessees to claim credit of the duty paid on any of the inputs or capital goods. Obviously, it would refer to the inputs in respect of which payment of duty liability is discharged under the first part of the condition. Occasion to claim credit of duty can arise only when duty is actually paid, and not otherwise. And, more important, this condition is not independent of the first part of the condition. It is a continuation of the first part of the condition which speaks of obligation to pay the duty and performance of such obligation by actual payment of duty, which is expressed by the words has been paid.
22. The Apex Court in Dhiren Chemical Industries case has ruled thus:-
5. In our view, the correct interpretation of the said phrase has not been placed in the judgment in the case of Usha Martin. The stress on the word Appropriate had been mislaid. All that the word appropriate in the context means is the correct or the specified rate of excise duty.
6. An exemption notification that uses the said phrase applies to goods which have been made from duty paid material. In the said phrase, due emphasis must be given to the words has already been paid. For the purposes of getting the benefit of the exemption under the notification, the goods must be made from raw material on which excise duty has, as a matter of fact, been paid, and has been paid at the appropriate or correct rate. Unless the manufacturer has paid, the correct amount of excise duty, he is not entitled to the benefit of the exemption notification.
7. Where the raw material is not liable to excise duty or such duty is nil, no excise duty is, as a matter of fact, paid upon it. To goods made out of such material the notification will not apply.
8. The notification is intended to give relief against the cascading of excise duty on the raw material and again on the goods made therefrom. There is no cascading effect when no excise duty is payable upon the raw material and the hardship that the notification seeks to alleviate does not arise.
23. Learned Advocates for the appellants however, tried to distinguish the said decision while contending that the notification which was under consideration before the Apex Court did not have the expression read with any other notification. As already observed above, the said expression cannot be read de hors the remaining portion of the condition and forgetting the qualifying expression has been paid. The actual and factual payment of duty in terms of the rate prescribed being condition clearly specified thereunder, the same clearly rules out non-applicability of the ruling of the Apex Court in Dhiren Chemical to the matter in hand. The Apex Court therein has clearly highlighted the importance of the expressions appropriate rate of duty and has already been paid. The conditions in the case in hand also refers to the appropriate rate of duty and the fact that the same has been paid. In other words, it speaks of actual payment of the duty. In our considered opinion, therefore, the contention that the Dhiren Chemical case will have no application to the cases in hand cannot be accepted.
24. As rightly pointed out by the representatives of the Department, pursuant to the judgment delivered by the Apex Court in Dhiren Chemical, the Board issued a Circular No. 667/58/2002-CX, dated 26.09.2002 clarifying that whenever an exemption is subject to the condition that appropriate duty of excise has been paid on the inputs, the exemption will not be available if the inputs are exempted from excise duty or are subject to nil rate of excise duty.
25. Learned Advocates for the appellants however, have drawn our attention to the Explanatory Notes to the Budget of 2002 and in particular to the portion which is already quoted herein above. In fact, the said Explanatory Notes do not refer to the condition attached to the notification in question. It is essentially in relation to the Explanation II to the said notification. Being so, the same cannot be of any assistance while dealing with the condition independently of the said explanation. We will deal with the said notes while dealing with the contentions` which are sought to be canvassed in relation to the Explanation II.
26. Being so, it is difficult to accept the contention that the benefit under the said notification would be available irrespective of the fact whether the yarn or fabric has been actually subjected to the payment of duty or not. While referring to the expression any notification for time being in force and stressing the word any therein, it was sought to be contended that the condition cannot be restricted to those notifications which do not prescribe nil rate of duty and rather, they would include the notifications prescribing nil rate of duty. As already observed above, the expression is qualified by another expression namely has been paid. Being so, it is not possible to give wider meaning to the words any preceding words notification and rather it will have to be read in a restrictive or narrow sense whereby it would refer to those notifications which deal with effective and appropriate rate of duty of excise, compliance of which would result in actual payment of duty.
27. Coming to the contentions which are sought to be raised in relation to Explanation II, it would be worthwhile, at the cost of repetition, to reproduce the said Explanation. The same reads as under:-
For the purposes of the condition specified below, textile yarn or fabrics to be deemed to have been duty paid even without production of the documents evidencing payment of duty thereon.
28. It is settled law that while interpreting a provision creating a legal fiction, the Court or Tribunal has to ascertain purpose for which the fiction is created. After ascertaining the same, the Court or Tribunal has to assume of those facts existence of which is incidental or inevitable to give full effect to the fiction; but in the process, the fiction can not to be extended beyond the purpose for which it is created. However, it must also be remembered that what can be deemed to exist under a legal fiction are the facts and not legal consequences which do not flow from law as it stands.
29. It is also settled law that an explanation has to be read to harmonize with and clear up any ambiguity in the main section and should not be so construed to widen the ambit of that section. The meaning to be given to an explanation would really depend upon its terms and not on any theory of its purpose unless it is to be inferred from the language used in the explanation clause itself.
30. If we read the Explanation, it would be apparent that the same has been incorporated with a specific purpose and directly in relation to certain obligation which is required to be discharged by an assessee in order to enable him or her to claim the benefit under the notification. The purpose specified therein relates to the condition. The obligation of the assessee prescribed under condition relates to discharge of duty liability. The explanation specifies that even without production of any document evidencing payment of duty, the assessee would be entitled to claim the benefit under the notification. In other words, the explanation absolves the assessee from the primary obligation of an assessee which is otherwise required to be performed while claiming any benefit under a taxing statute and it relates to the proof of payment of duty. It is settled law that it is always for the assessee to establish that he has discharged the liability regarding the payment of duty or tax. Only when this primary burden is discharged, the onus shifts upon the department to establish that the assessee is a defaulter. In case of claim of benefit under the notification in question, however, the executives have made an exception in favour of the assessees claiming benefit under the said notification. The assessee is absolved of such primary burden. The fiction that is created under the notification therefore essentially relates to the requirement of evidence pertaining to the discharge of such burden. It cannot be extended beyond the said scope of the fiction. If it is extended to the fact of actual payment itself, it will virtually amount to rewriting the explanation. As already observed above, in order to give full effect to a legal fiction, the Courts and Tribunals are not empowered to create another fiction which is not contemplated under the provision.
31. Explanation II to the said notification which is essentially for the purpose of condition specified thereunder creates a deeming provision regarding the discharge of duty liability by the assessee cannot be construed to mean payment of duty even in cases where the assessee has not actually paid the duty. To presume payment of duty even in a case of no such payment having been made, it would amount to create another fiction which is not contemplated under the said explanation.
32. In S. Teja Singh case, the Apex Court was dealing with the question as to whether under Section 28(1) read with Section 18-A(9) of the Indian Income Tax Act 1922, the Income tax authorities were empowered to impose a penalty on a person who had failed to comply with Section 18-A(3) of the Act. While dealing with the said question and after noting the legal fiction that had been enacted under Section 18A(9)(b) of the Act to the effect that when a person had failed to send an estimate of tax on his income under Section 18-A(3), he was deemed to have failed to furnish the return of his income, it was held that Section 18-A(9)(b) did not merely say that an estimate under Section 18-A(3) should be deemed to be a return but it enacted that the failure to send an estimate in accordance with Section 18-A(3) would be deemed to be a failure to make a return. While rejecting the contention that there could be no failure to make a return unless notice have been issued under Section 22(1) or Section 22(2), it was held that it was a deeming fiction regarding compliance of requirement of service of notice as the failure to send an estimate was itself to be deemed to be a failure to send a return which necessarily involved the fiction that notice had been issued under Section 22 and yet that had not been complied with. It was specifically held that it is a rule of interpretation well settled that in construing the scope of a legal fiction it would be proper and even necessary to assume all those facts on which alone the fiction can operate. After quoting the observations of Lord Asquith in East End Dwellings Co. Ld. V. Finsbury Borough Council reported in 1952 AC 109, 132 to the effect If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imaging as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs, it was ruled that fiction under Section 18A(9)(b) therefore that failure to send an estimate under Section 18A(3) is to be deemed to be a failure to send a return must mean that all those facts on which alone there could be a failure to send the return must be deemed to exist, and it must accordingly be taken that by reason of this fiction, the notices required to be given under Section 22 must be deemed to have been given, and in that view, Section 28 would apply on its own terms.
33. The Apex Court, therefore, has clearly ruled that the fiction created under Section 18A(9)(b) which presumed failure to send return leads to presumption about compliance of requirement of service of notice. Because in the absence of service of notice under Section 22(1) and 22(2) of the Indian Income Tax Act, 1922 there could not have been any obligation to comply with the requirement of filing of the return and, therefore, the power to impose penalty could not have been exercised. Reverting to the explanation in the matter in hand, it deems the existence of proof of the payment of duty without the production of the documents evidencing the payment. In other words, while dealing with the fiction regarding the proof of the payment of duty whatever is required for compliance and fulfillment of the obligation regarding the payment of duty can be presumed to have been done. At the same time such presumption is exclusively related to the condition attached to the notification. As already quoted above, the condition clearly speaks of actual payment. Consequently, the existence of the facts which could be presumed for giving full effect to the deeming provision would be in relation to the actual payment of duty as contemplated under the condition. The presumption of existence of the fact cannot be of those facts which are not required for compliance of the condition attached to the notification. The presumption cannot be of those facts which are neither incidental nor inevitable, but has necessarily to be of those facts which are incidental or inevitable in relation to the payment of duty, since the provision being essentially related to the actual payment of duty as contemplated under the condition, and not otherwise.
34. In Voltas Limited case, the Apex Court was dealing with the appeals filed under Section 55 of the Monopolies and Restrictive Trade Practices Act, 1969 and the point relating to the deeming provision under Section 33 of the Act. Referring to sub-section (1) of Section 33, it was observed that it mandates that the agreements covered under different clauses of sub-section (1) thereof should be deemed, for the purposes of the Act, to be the agreements relating to restrictive trade practices. It was observed that by the deeming clause one is not required to treat any imaginary state of affairs as real but to treat the agreements specified and enumerated in sub-section (1) of Section 33 as the agreements relating to restrictive trade practices. It can be said that Parliament after having examined different trade practices, had identified such trade practices which were to be held as the restrictive trade practices for the purposes of the Act. To keep such trade practices beyond controversy in any proceeding, a deeming clause has been introduced in sub-section (1) of Section 33 saying that they should be deemed to be restrictive trade practices and in that background, there was no much scope for argument that although a particular agreement was covered by one or the other clauses of sub-section (1) of Section 33, still it should not amount to an agreement containing conditions which could be held to be restrictive trade practices within the meaning of the Act. Referring to the said deeming clause, it was specifically observed by the Supreme Court that The legislature by a statute may create a legal fiction saying that something shall be deemed to have been done which in fact and truth has not been done, but even then Court has to give full effect to such statutory fiction after examining and ascertaining as to for what purpose and between what parties such statutory fiction has been resorted to. In the case in hand, the deeming provision relates of the existence of documentary proof relating to discharge of duty liability and not to the factum of actual payment of duty.
35. In Moon Mills Ltd., case, the Apex Court was dealing with the reference in relation to the issue as to whether in the facts and circumstances of the case before it, the sum of Rs. 27,06,593/- was assessable as a profit of the assessee company for the previous year relevant to the assessment year 1949-50 in accordance with the fourth proviso to Section 10(2)(vii) of the Indian Income Tax Act, 1922. Section 10(2) of the Income Tax Act was dealing with the statutory allowances as distinguished from deductions those could be made in commercial practice for ascertaining the profits of a business. Under the said clause where any building, machinery or plant was discarded, demolished or destroyed, an allowance was given in respect of the amount by which the written down value of the such building machinery or plant exceeded the amount for which it was sold or its scrap value. But the 4th proviso introduced a fiction that in case any insurance, salvage or compensation money was received in respect of the such property exceeded the difference between the written down value and the scrap value, so much of the excess as mentioned therein was to be deemed to be the profits of the previous year in which such monies were received. Though in fact the said compensation represented a capital asset to the extent mentioned in the proviso, the compensation was deemed to be the profits of the previous year in which such monies were received. The proviso, therefore, introduced a fiction. What was not a profit in the previous year was deemed to be a profit in that year. The previous year was that year in which such monies were received. The fiction was an indivisible one. It could not be enlarged by importing another fiction, namely, that if an amount was receivable during the previous year it was deemed to have been received during that year. In the case in hand, the deeming clause relates to the existence of documentary proof of payment of duty and not relating to the payment of duty itself. In other words, while claiming the benefit under the notification, the assessee need not produce documentary proof of payment of duty. But if it is shown by the department that the assessee has not paid any duty on the products specified in the conditions, then certainly the claim for benefit under the notification can be denied.
36. The Apex Court, therefore, has clearly ruled that undoubtedly efforts should be to give full effect to the fiction created under a statute. However, in the process of giving full effect to a fiction created under a statute, the Courts and Tribunals are not empowered to create another fiction and thereby extend the benefits of the legal fiction under a statute to a totally different situation.
37. Undoubtedly, the explanation in question creates a fiction about the presumption of payment of the duty for the purpose of condition. It does not enlarge the scope of the condition. However, every presumption is rebutable. To interpret the fiction created under the explanation to mean that even in case of a product which is subjected to nil rate of duty to be presumed to have been subjected to the payment of duty would not only result in enlarging the scope of the explanation, but also scope of the condition itself.
38. Under the guise of interpretation of any statutory provision relating to a taxing matter, there is no power vested in the Tribunal to enlarge the scope of the exemption notification or to modify the same.
39. It was sought to be contended that unless the interpretation sought to be canvassed on behalf of the assessees is accepted, it can virtually result in imposing duty of 24% on the products in question and it would virtually result in denial of benefit of the exemption notification to some of the products. It is sought to be contended that prior to 2002 knitted processed fabric was completely exempt from duty besides that the mean rate of excise duty levied on any product under the budgetary provisions in the year 2002 was only 12%. Being so, it is contended that rejection of the interpretation sought to be canvassed on behalf of the assessees would result in duty being levied at the rate 24% on the processed knitted fabrics and it would be totally contrary to the purpose and the object of the scheme and the notification in question.
40. Merely, because the rejection of the interpretation sought to be canvassed on behalf of the assessees could result in levy of 24% of duty on the processed knitted fabrics that cannot be a reason to accept the interpretation sought to be canvassed on behalf of the assessees. In taxing statute, hardship can not be a ground to accept the interpretation sought to be canvassed on behalf of the assessee. As far as the rate of duty is concerned, it is exclusively in the domain of executive wisdom. It is not the function of the Court and/ or Tribunal to interpret the statutory provision merely to minimize the rate of duty or to enlarge the benefit to the assessee. That is essentially an executive function to be exercised in accordance with the policy which is required to be adopted in fiscal matters. For the reasons stated above, therefore, the contention cannot lend any support to convince us to accept the interpretation which is sought to be canvassed on behalf of the assessee.
41. As regards the explanatory note to 2002 Budget, undoubtedly, it states that the notification in question prescribes effective rates of duty of nil or 12% adv. in case of textile fabrics subject to condition that the goods should have been made from textile yarns or fabrics on which the appropriate excise duty or CVD has been paid. It further states that the Explanation II to the notification makes it clear that all fibres and yarns are deemed to have been duty paid even without production of documents evidencing payment of duty. The statement in the said explanatory note to the effect that Explanation II to the notification makes it abundantly clear that all fibres and yarns are deemed to have been duty paid even without production of documents evidencing payment of duty is sought to be highlighted to contend that even it was the understanding of the legislature that the explanation includes the cases where the product is subjected to nil rate of duty. We find the contention to be devoid of substance. A sentence in the explanatory notes cannot be read independently of the context in which it is recorded. The statements in the explanatory note nowhere state that the Explanation II itself discloses that it would include cases where products are subjected to nil rate of duty. On the contrary, it merely speaks of entitlement of the assessee to claim benefit without producing any documentary evidence relating to the payment of duty and is preceded by the sentence wherein the note clearly refers to the condition which the assessees has to comply with in order to avail the benefit under the notification and the same reads that . subject to condition that the goods should have been made from textile yarn units and fabrics on which the appropriate excise duty or CVD has been paid. This cannot lead to a conclusion that the assessee can claim the benefit under the said notification without even making any payment of duty nor it could lead to a conclusion that the assessee who had already availed benefit under some other exemption notification would also be entitled to claim the benefit under the present notification ignoring the obligation prescribed under the condition regarding the requirement of payment of duty.
42. The decision in Usha Martins case was in a totally different set of facts. Therein the contention raised on behalf of assessee had clear support from the Boards circular, besides the observations of a proviso which existed in a comparable notification therein also lend support to the interpretation sought to be given to the notification under consideration in that case, and therefore, in the facts of the case, looking from different angles, the Apex Court was inclined to take a view that the benefit of exemption from duty could legitimately be claimed by the assessees in respect of those goods referred to in the notification under consideration before the Apex Court the raw materials of which were not exigible to any excise duty at all. That is not the case in the matter in hand, and the wordings of the notification in question before us are not similar to that of the said notification before the Apex Court in Usha Martins case.
43. Attention was also drawn to the decision of the Apex Court in the matter of K.P. Varghese vs. Income Tax Officer, Ernakulam and Another reported in (1981) 4 SCC 173 and particularly to para 11 thereof. While referring to the explanatory note in the said decision, the Apex Court has held that the rule of construction by reference to contemporanea exposition is a well-established rule for interpreting a statute by reference to the exposition it has received from contemporary authority, though it must give way where the language of the statute is plain and unambiguous. The Apex Court has also referred to a decision of Calcutta High Court in the matter of Baleshwar Bagarti vs. Bhagirathi Dass reported in LR 35 Calcutta 701 wherein it was stated that it is well settled principle of interpretation that courts in construing a statute will give much weight to the interpretation put upon it, at the time of its enactment and since, by those whose duty it has been to construe, execute and apply it. Perusal of the explanatory note, nowhere discloses understanding of the Parliament or the Executive about the Explanation II about the said notification to be that the fiction created thereunder would include the cases wherein the assessee was not required to make actual payment of duty. Being so, the said decision is also of no help to the appellants.
44. The view that we are taking in this matter was also the view of the Tribunal in the matter of Sports &Leisure Apparel Limited case. It was clearly observed there that the Explanation only takes away the requirement of production of the evidence of duty payment in respect of textile fabrics and it does not anywhere mention that the appropriate duty of excise leviable on textile fabrics need not be paid or that the textile fabrics shall be deemed to have been duty paid even if it was exempted from payment of duty or it has not suffered any payment of excise duty.
45. At this stage, it is worthwhile to refer to the decision in the matter of CCE, Mumbai-I vs. Bombay Dyeing & Mfg. Co. Ltd., reported in 2007 (215) ELT 3 (SC) wherein, with reference to the notification in question itself, it was observed 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 exemption. The question of exemption from payment of duty on grey fabrics arose on satisfaction of the said two conditions. Though, the exemption notification in question was not subject matter of detail discussion, in the said case, the Apex Court clearly took note of the fact that in order to avail benefit under the said notification, it was necessary to comply with the conditions specified thereunder and those conditions include the condition regarding the payment of duty on the yarn.
46. The view that we are taking in relation to the scope of the legal fiction created under the said Explanation has been reiterated by the Tribunal in the matter of Dogra Distilleries (supra).
47. In the facts and circumstances of the case and for the reasons stated above including the decision of the Apex Court in Dhiren Chemical, the observations in Machine Builders case cannot lend any support to the contentions sought to be canvassed on behalf of the assessees.
48. It is true, that in Prem Industries case, wherein both of us were parties to the decision, related to the claim of benefit under the notification in question. But as rightly submitted on behalf of the Department that the decision was essentially on the basis of the Circular dated 10.12.2002. Besides the same was decided in the absence of any assistance on behalf of the assessee and the question which are sought to be raised in the matters in hand were never raised therein. This is apparent from a plain reading of the order passed therein. It was clearly observed therein that there was no dispute about availability of concessional rate of duty under a notification in question to the processed knitted fabric made in the appellants factory from yarn stage in a continuous process. In that set of facts, the order came to be passed in Prem Industries case which cannot apply to the cases in hand. Being so, the said decision is of no help to the assessees in the matters in hand.
49. As regards the point in relation to penalty imposed by the lower authorities in most of the cases, needless to say that matter involved the issue relating to the interpretation of the notification and, therefore, the appellants are justified in contending that there was no case for imposition of penalty. Therefore, in such circumstances, we do not find any justification for upholding the decision regarding imposition of the penalty and the same need to be quashed.
50. In some of the matters, grievance is also made in relation to quantification of the duty. Needless to say that nothing will prevent the appellants from approaching the competent authority to get a mistake, if any, in that regard being ractified.
51. For the reasons stated above, therefore, while setting aside the impugned orders as far as they relate to imposition of penalty is concerned, the appeals in relation to denial of the claim of benefit under the said notification are concerned, the same are liable to be dismissed. The appeals therefore partly succeeds as far as they relate to the issue of penalty and fail as far as they relate to the claim of benefit under said notification. All the appeals are accordingly disposed of in the above terms.
(Pronounced in the open Court on 11th & 12th November 2009).
[Justice R.M.S. Khandeparkar] President [Rakesh Kumar] Member [Technical] /Pant/