Customs, Excise and Gold Tribunal - Tamil Nadu
Srf Ltd. vs Commissioner Of C. Ex. on 5 June, 1998
Equivalent citations: 1999(108)ELT243(TRI-CHENNAI)
ORDER V.K. Ashtana, Member (T)
1. For hearing their Appeal No. E/1005 the applicants have come up with stay petition E/Stay/675/98 aggrieved by the Order-in-Original 10/97, dated 18-12-1997 passed by Commissioner of Central Excise, wherein, a central excise duty of Rs. 6,20,74,484/- has been confirmed on Nylon Polyamide Chips manufactured as an intermediate product. Further, these chips were used for inhouse manufacture of Nylon Yarn of 210 Denier which were classified as Fishing Net Yarn. The Modvat credit of Rs. 37,78,333/- taken in respect of various inputs used in the manufacture of such yarn has also been ordered to be reversed because the final product i.e. yarn was cleared on full duty exemption under Notification 27/95-C.E. as amended from time to time. The Commissioner's order also imposed a penalty of Rs. 50,000/- on the appellants.
2. Heard learned Advocate Shri Lakshmikumaran, appearing for the appellants. He argued that the Nylon Polyamide Chips alleged to have been manufactured by them and which are subject of this impugned order-in-original were not manufactured from virgin raw material but instead they were manufactured from Nylon Tyre scrap/waste which was first depolymerised and, thereafter, converted to Nylon Polyamide Chips through an inhouse facility available with them. Because of this re-cycling technology the chips were not having the same physical and chemical properties, which were manufactured out of the virgin material. He, therefore, described them as inferior grade or second grade and that by itself made them non-marketable. There is no evidence to show that sale was either negotiated or actually made for them.
3. Secondly, he also argued that the said chips were covered by Notification 111/95-C.E. read with earlier Notification No. 15/94-C.E. In fact, their classification list claiming full duty exemption under these notifications already stood approved by the concerned Assistant Commissioner. He, therefore, concluded that on both these counts the duty confirmed was not sustainable. In this connection he drew our attention to para 8.7 to para 8.8 of the impugned order-in-original, wherein, submissions with regard to the non-marketability of chips made out of Nylon waste has been documented. He conceeded that the claim for exemption was somehow lost sight of during submissions made before the Commissioner at the original stage. He further Submitted that as per para 19 of the impugned order-in-original, the learned Commissioner has noted during his findings that the said 210 Denier yarn has been made from Nylon waste. He, therefore, submitted that there is no dispute on these basic facts.
4. His second argument was with respect to the order in the impugned Order-in-original regarding the reversal of the Modvat credit. He submitted that the Fish Net Yarn which was the final product in which the inputs were consumed during its manufacture were finally exported by following the various prescribed procedures. There is no dispute that such export was not carried out. Therefore, the entire Modvat credit on goods exported is available legally under Rule 57F(14).
5. Thirdly, the learned Advocate pointed out that they had during the course of these proceedings already paid an amount of Rs. 1.04 crores towards duty demanded and reversed a credit of Rs. 2.53 lakhs from the Modvat credit in question. He prayed that these may be taken into consideration while deciding the issue.
6. Heard learned JDR, Shri Murugandi, who submitted that the 210 Denier Nylon Yarn was cleared on full duty exemption, there was no claim for duty exemption under Notification 15/94 read with Notification 111/95 on the Nylon Polyamide Chips so manufactured at the original stage and therefore this is a fresh argument. Regarding the marketability of the said chips, the learned Commissioner has already given suitable findings in para 21 of the impugned order-in-original. He further submitted that since the final product viz., Nylon Fish Net Yarm itself is fully exempted from duty under the aforecited notifications, therefore, on export thereof no benefit in Modvat credit scheme was available, because according to Rule 57F(14) Modvat credit could be retained only when the end product was actually to pay duty but was cleared without payment of duty by virtue of the fact that it was being exported.
7. Learned Advocate on this point submitted that in case the Modvat credit is denied, they would in any case get the same amount under the Duty Drawback scheme. They had not claimed the duty drawback in the shipping bill because they have claimed Modvat credit and a declaration to this effect has been made. In view of the fact that the exemption to the Nylon Polyamide Chips, though they stood clearly exempted from duty as per the classification list itself is provided by the department, but could not be considered in the impugned order-in-original because this argument was somehow not brought but in the adjudication proceedings. Therefore, the law as should have been applied could not be applied. On this ground and on the merits prima facie he has very strong case and yet he has already deposited Rs. 1.04 crores on duty as well as reversed the aforementioned Modvat credit. He prayed that the appeal may be, however, considered without asking for any further pre-deposit. He also prayed that in fact since the appeal concerned a matter which was on a short compass, the appeal on merits could itself be considered at this stage and prayed that the matter may be remanded to the learned original authority for re-consideration.
8. We have carefully considered the arguments on both sides. We find that prima fade the Nylon Polyamide Chips are entitled to the exemption, particularly because the department itself has so approved their classification list. As regards the reversal of Modvat credit also, we find that prima facie a case has been made out because the final product viz., Yarn for Fishing Net was exported, a fact which is not in dispute. Taking note of the deposits already made and the credit already reversed, we find that the interest of justice would be met if the balance of duty and penalty as well as the Modvat credit to be reversed are waived from pre-deposit and their recovery stayed.
9. Since the issue is on a short compass, we now proceed to consider the appeal itself by common consent of all.
10. We find that the main issue in this impugned order-in-original is the dutiability or otherwise of the Nylon Polyamide Chips. On this issue there has been unknowingly a miscarriage of justice because of non-submission and, therefore, non-consideration of the duty exemption available under the aforementioned notification and as stood approved in the classification list itself. On this count alone the matter requires to be remanded to the original authority for re-consideration.
11. Since on a prima fade consideration we find that the exemption has been lawfully claimed, therefore, the impugned order-in-original is set aside and the matter remanded to the original authority for consideration afresh. While doing so, the learned Commissioner is also directed to hear the appellants on not only question of dutiability of the Nylon Polyamide Chips, but also their plea that the Modvat credit taken on inputs need not be reversed in view of the fact that the finished product was exported.
12. The appeal, therefore, succeeds by way of remand.