Custom, Excise & Service Tax Tribunal
M/S. Paras Fab International vs Cce, Jaipur on 22 January, 2009
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
BENCH Excise
E/4310/04 & 4965/04
(Arising out of Order-in-Appeal No.265-266(SN)/CE/JP-I/04 dt.15.7.04 passed by Commissioner(Appeals), Jaipur)
M/s. Paras Fab International
M/s. Vanasthali Textile Inds. Ltd. Appellant
Vs
CCE, Jaipur Respondent
Coram : Honble Mr. D.N.PANDA, MEMBER(JUDICIAL) Honble Mr. RAKESH KUMAR, MEMBER (TECHNICAL) Appeared for the Appellant : S/Sh. C.Hari Shanker with Pushkar,Advs. Sh. R.Krishnan, Adv.
Appeared for the Respondent: Shri V.Chaudhary,Jt.CDR Date of Hearing: 22.1.09 Order No.____________Dt.__________ Per Rakesh Kumar:
This is a common order in respect of Appeal No.E/4310/04 filed by M/s. Paras Fab International and Appeal No.E/4965/04 filed by M/s. Vanasthali Textile Inds. Ltd. against the impugned order-in-appeal No.265-66(SN)/CE/JP-I/04 dt.15.7.04 passed by Commissioner(Appeals), Jaipur. Both the Appellants are 100% EOUs engaged in the manufacture of Terry Towels for export. As per the Exim Policy, the 100% EOUs are allowed to sell a portion of their production into Domestic Tariff Area(DTA) on payment of appropriate duty as per the provisions of the proviso to Section 3(1) of Central Excise Act read with exemption notification, if any applicable. As per the proviso to Section 3(1), the duty payable on the goods manufactured in a 100% EOU and cleared into DTA is an amount of equal to aggregate duties of Customs which would be leviable under Customs Act,1962 or any other law for the time being in force on the like goods produced or manufactured outside India, if imported into India and where the said duties of Customs are chargeable by reference to their value, the value of such excisable goods shall be determined in accordance with the provisions of Customs Act,1962 and the Customs Tariff Act,1975. Notification No.8/97-CE dt.1.3.97 issued under Section 5A of Central Excise Act,1944 prescribed a concessional rate of excise duty on the DTA clearances of 100% EOU, if the goods had been produced wholly from raw-materials produced or manufactured in India and the clearances have been made as per the provisions of Exim Policy. The concessional rate prescribed under this notification is the duty of exercise leviable under Section 3 of Central Excise Act,1944 on the like goods produced or manufactured in India, other than in a 100% EOU or a free trade zone. In other words when the 100% EOU manufactures its finished products wholly out of indigenous raw-materials, the DTA clearance of such goods, if made as per the Exim Policy, would attract duty at the same rate at which such goods produced by a unit in DTA would suffer the Central Excise Duty. In these cases, there is no dispute about the fact that both the Appellants were eligible for Notification No.8/97-CE. The point of dispute is as to what would be the effective rate i.e. whether the Appellants are eligible for concessional rate of duty prescribed under Notification No.15/02-CE dt.1.3.02(S.No.17) which prescribes a concessional rate of duty of 75% of the tariff rate in respect of all goods of Chapter 63 except jute blankets and sacks and bags used for packing of the goods, subject to condition that such goods have been made from woven textile fabrics, whether or not processed, on which Central Excise Duty under the first schedule to the Central Excise Tariff Act and Additional Excise Duty chargeable under Additional Duties of Excise(Goods of Special Importance)Act [(hereinafter referred to AED(GSI)], read with any exemption notification for the time being in force or Additional Duty of Customs chargeable under Section 3 of the Customs Tariff Act,1975, as the case may be, has been paid. According to the Appellants, the DTA clearances of the Terry Towels made by them satisfied the conditions of the Notification No.15/02-CE and hence the same are eligible for concessional rate of duty, under this notification, while according to the Revenue, the Appellants do not satisfy the conditions of this notification and they are not eligible for the benefit of the same. It is on this basis that the Additional Commissioner vide order-in-original No.185/2003 dt.29.9.03 in case against M/s. Paras Fab International, Alwar (hereinafter referred to as PFI) and Jt. Commissioner vide order-in-original No.116/03 dt.22.8.03 in case against M/s. Vanasthali Textile Inds. Ltd. (hereinafter referred to as VTI) confirmed the duty demand of Rs.29,20,088/- and Rs.8,66,457/- respectively alongwith interest under Section 11AB for the periods from 11.3.02 to 31.12.02 and March02 to Feb03 respectively and imposed penalties of Rs.10 lakhs and Rs.90,000/- respectively on them under Rule 25(1) of Central Excise Rules,2002. The Commissioner(Appeals) vide the impugned order upheld the duty demands but set aside the penalties.
3. Heard both sides.
3.1 Shri C.Hari Shanker, Advocate representing PFI and Shri R.Krishnan, Advocate representing VTI made the following submissions:
(1) As per explanation to Notification No.15/02-CE for the purpose of conditions for concessional rate of duty specified in the notification. textile yarns and fabrics shall be deemed to be paid duty even without production of documents evidencing payment of duty thereon. In view of this explanation, the terry towels sole into DTA are deemed to have been produced out of duty paid terry towel cloth.
(2) The Central Board of Excise & Customs(CBEC) vide circular No.125/36/95-CX dt.15.5.95 in respect of exemption from excise duty on goods manufactured from duty paid goods, has clarified that there are a number of notifications which exempt specified goods provided such goods have been made from other goods on which appropriate duty of excise had been paid for example Notification No.35/95-CE and 28/95-CE and that even if the inputs are exempt from excise duty, the exemption on the finished goods cannot be denied on the ground that the inputs were exempt from the whole of duty of Excise. As per Supreme Courts judgment in the case of CCE vs Dhiren Chemical Industries reported in 2002(139)ELT.3(SC) read with subsequent judgment in the case of CCE vs Dhiren Chemical Inds. reported in 2002(143)ELT.19(SC), Boards circulars are binding on the Revenue.
(3) The objective of the Notification No.8/97-CE is to put the goods manufactured by a 100% EOU totally out of indigenous raw-materials on par with the like goods manufactured by the units in DTA and if the duty exemption under Notification No.15/02 is denied to the Appellants, this parity would get disturbed. In this regard, reliance is placed on the judgment of the Supreme Court in the case of Nahar Industrial Enterprises Ltd. vs UOI reported in 2004(170)ELT.518(SC).
(4) The Appellants also rely upon Honble Gujarat High Courts judgment in the case of Luck Star International vs UOI reported in 2001(134)ELT.26(Gujarat).
3.2 Shri V.Choudhary, Jt.CDR, the learned Departmental Representative pleaded that since the Appellants do not manufacture terry towels out of duty paid fabrics, they do not satisfy the condition for duty exemption under Notification No.15/02-CE, that the explanation to this Notification and the Boards Circular No.125/36/95-CX dt.15.5.95 is meant for those manufacturers who have purchased the fabrics from the market and made the goods of Chapter 63, covered by S.No.17 of the table annexed to the Notification No.15/02-CE and it is not applicable to 100% EOUs who procure duty free fabric or yarn against CT-3 certificate for production of the finished goods for export and that subsequently even the Boards circular No.125/36/95-CX. Dt.15.5.95 had been modified by circular No.667/58/02 dt. 26.9.02 and that as per the revised circular, the Appellants are not eligible for concessional rate of duty under Notification No.15/02-CE.
4. We have carefully considered the submissions from both the sides and perused the records. The Appellants manufactured terry towers falling under Chapter 63 of Central Excise Tariff from yarn acquired free of duty against CT-3 certificate under Notification No.15/02-CE. The condition for exemption in respect of the goods of Chapter 63 mentioned against S.No.17 of the table annexed to the Notification No.15/02-Ce is that the same must have been made from woven textile fabrics, whether or not processed, on which appropriate duty of exercise chargeable under Central Excise Tariff Act and AED(GSI) chargeable under Additional Duty of Excise(GSI)Act read with any exemption notification for the time being in force has been paid. Since prima-facie the terry towels have not been made from the textile fabrics on which Central Excise Duty has been paid, the condition for exemption is not satisfied. We also find that the Boards circular No.125/36/95-CX dt.15.5.95 relied upon by the Appellant was subsequently modified by the Boards circular No.667/58/02-CX. dt. 26.9.02 and the modified circular reads as under:
Subject Exemption from Central Excise Duty on goods manufactured from duty paid goods regarding.
The undersigned is directed to refer to Boards circular No.125/36/95-CX. Dt.15.5.95, issued from F.No.341/26/95-TRU, on the above subject.
2. It was clarified therein that in the context of notifications which exempt specified goods provided such goods have been made from other goods on which appropriate duty of excise has already been paid, the benefit would be available even if the inputs are exempted from excise duty. This was based on the opinion of the Ministry of Law that the expression appropriate duty of excise would include nil duty also, having regard to the judicial pronouncements prevailing then.
3. The interpretation of the expression appropriate duty of excise has already been paid was considered by a Constitution Bench of the Honble Supreme Court in the case of CCE, Vadodara v. Dhiren Chemical Industries (2002(139)ELT.3(SC) = 2001(47)RLT.881(SC). The Honble Supreme Court have held that the word appropriate in the context of such exemption notifications means the correct or specified rate of excise duty, and that where an exemption is extended subject to the condition that the appropriate duty has been paid on the raw material, then such exemption shall not be available when the raw material is not liable to excise duty or such duty is nil. In the light of the above, the clarification given by the Board that nil duty paid goods or fully exempted goods should be deemed to be goods on which appropriate duty of excise has been paid no longer holds goods.
4. Boards circular No.125/36/95-CX dt.15.5.95 stands accordingly modified in view of the law now laid down by the Constitution Bench of the Honble Supreme Court. Consequently, 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. The same considerations will apply to additional duty of customs also.
5. In both these cases, the finished goods terry towels have been made from inputs procured free of central excise duty. Therefore, in view of the above circular of the Board, which is based on the judgment of the Constitutional bench of Honble Supreme Court in the case of CCE, Vadodara vs Dhiren Chemical Industries, the benefit of exemption under Notification No.15/02-CE would not be available.
5.1 The issue involved in Honble Supreme Courts judgment in case of Nahar Industrial Enterprises Ltd. vs UOI(supra) was as to whether in view of amendment to Notification No.8/97-CE vide notification No.11/2000-CE dt.1.3.2000 inserting the words or under any other law for the time being in force, the DTA clearances mode by a 100% EOU, as per the EXIM policy, of the goods wholly made out of indigenous raw-materials would attract Additional Excise Duty under Additional Duties of Excise (Textiles & Textile Articles) Act,1978 [AED (TTA)], even though notification No.55/91-CE dt.25.7.91 exempts all excisable goods produced or manufactured in a 100% EOU from whole of AED(TTA). Honble Supreme Court held that the amendment to notification No.8/97-CE by notification No.11/2000-CE w.e.f. 1.3.2000 does not dilute the notification No.55/91-CE. The issue involved in the present case is totally different. The issue involved in the case of Lucky Star International vs UOI (supra) was as to whether for the purpose of exemption under Notification No.5/98-CE, 5/99-CE & 6/2000-CE the condition of goods having been processed in India would be satisfied if the processing is done in a unit in Kandla Free Trade Zone and Honble Gujarat High Court answered this question in the affirmative. The ratio of this judgment has no relation to the issue involved in this case. Thus none of the judgments cited by the Appellants help them in any manner in this case.
6. In view of the above discussions, we find no infirmity in the impugned order. The appeals are dismissed.
(D.N.Panda) Member(Judicial) (Rakesh Kumar) Member (Technical) km