Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs M/S Shreekar Polyester Pvt. Ltd on 5 October, 2016
IN THE CUSTOMS, EXCISE AND SERVECE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT NO. IV APPLICATION NO. E/CO/350/06 APPEAL NO. E/3271, 3278/05 & E/86154/13-Mum (Arising out of Order-in-Appeal No. BR/129/Th-I/05 dated 30.06.2005 passed by the Commissioner of Central Excise /Customs (Appeals), Mumbai-IV.) For approval and signature: Honble Mr. Ramesh Nair, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical) =====================================================
1. Whether Press Reporters may be allowed to see : No
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 : No CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy : Seen
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authorities?
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Commissioner of Central Excise, Thane-I
Appellant
Vs.
M/s Shreekar Polyester Pvt. Ltd.
M/s Raj Synthetics
M/s Rishabh Polyester
Respondent
Appearance:
Shri S.V. Nair, Assistant Commissioner (A.R.)
for Appellant
Shri V.M. Doiphode, Advocate
for Respondent
CORAM:
HONBLE SHRI RAMESH NAIR, MEMBER (JUDICIAL)
HONBLE SHRI C.J. MATHEW, MEMBER (TECHNICAL)
Date of Hearing: 05.10.2016
Date of Decision: 02.12.2016
ORDER NO.
Per: Ramesh Nair:
The fact of the case is that the respondents are engaged in the manufacture of Dyed Polyester Filament Yarn falling under Chapter No. 54, during relevant period of dispute they availed exemption of Notification No. 6/2002-CE dated 01.03.2002 (Sr. No. 126 with condition No. 31), accordingly, cleared the finished goods i.e. Dyed Polyester Filament Yarn on payment of specific basic excise duty of Rs. 9/- per Kg. + 15% on BED as additional Excise duty (T & TA). For the purpose of manufacture of the aforesaid goods the respondent purchase the texturised yarn on payment of appropriate duty which is subsequently twisted and thereafter dyed. The exemption notification was proposed to be denied on the ground that for the manufacture of Dyed Polyester Filament Yarn though the duty paid texturised yarn was purchased but captively the same was twisted and no duty was paid on the twisted yarn therefore the condition No. 31 of the notification stand violated. The adjudicating authority denied exemption Notification and confirmed the demand of duty amounting to Rs. 26,25,454/-. Being aggrieved by the Order-in-Original dated 24.03.2005, the respondent filed appeal before the Commissioner (Appeals) who vide the impugned order set aside the Order-in-Original and allow the appeals with consequential relief. Therefore the Revenue is before us.
2. Shri S.V. Nair, Assistant Commissioner (Authorised Representative) appearing on behalf of the Revenue reiterating the grounds of appeal, submits that since the respondent has violated condition no. 31 of the Notification No. 6/2002-CE in as much as, they purchased texturised yarn, which used for exempted twisted yarn and such exempted twisted yarn was used in the manufacture Dyed Polyester Filament Yarn, therefore they have not used duty paid yarn, accordingly the condition no. 31 stand violated, therefore the respondent was not entitled for exemption.
3. On the other hand Shri V.M. Doiphode, learned Counsel for the respondent submits that from the fact it is no dispute on purchase and use of duty paid texturised yarn. Twisting process is carried out on such duty paid yarn, which is subsequently used in the manufacture of dyed yarn. In this process texturised yarn on which Excise duty was paid and the final product is Dyed Polyester Filament Yarn as per the condition no. 31 of notification it is permissible the dyed yarn can be manufactured out of duty paid on textured yarn. He placed reliance on the following judgments
(i) Collector of Central Excise, New Delhi Vs. Hindustan Sanitaryware & Industries 2002 (145) ELT 3 (S.C.)
(ii) National Organic Chemical Indus. Ltd. Vs. Collector of Central Excise, Bombay 1997 (89) ELT 643 (S.C.)
(iii) Arvind Products Ltd. Vs. CCE, Ahmedabad 2014 (310) ELT 515 (Tri.-LB)
(iv) Kejariwal Yarns Pvt. Ltd. Vs. CCE, Surat 2010 (261) ELT 513 (Tri.-Ahmd.)
(v) Precot Mills Ltd. Vs. CCE, Bangalore 2005 (183) ELT 407 (Tri.-Bang.)
4. We have carefully considered the submissions made by both the sides. We find that in the facts & circumstances whether the respondent has complied with the condition no. 31 of Sl. No. 126 of exemption Notification No. 06/2002-CE dated 01.03.2002, the same is reproduced below:-
S. No. Chapter of Heading No. or sub-heading Description of goods Rate under the first Schedule Rate under the Second Schedule Condition No. 126 5402.31, 5402.32, 5402.39, 5402.41, 5402.42, 5402.43, 5402.49, 5402.51, 5402.52, 5402.59, 5402.61, 5402.62, 5402.69, 5403.20, 5403.31,5403.32, 5403.33, 5403.39, 5403.41, 5403.42 or 5403.49 Dyed, printed, bleached or mercerised yarn, whether single, multiple(folded), cabled or air-mingled, manufactured in a factory which does not have the facilities (including plant and equipment) for producing single yarn Rs. 9 per kg.
Nil 31 Condition No. 31
(i) manufactured out of textured or draw-twisted yarn, falling under Chapter 54 of the First Schedule on which the appropriate duty of excise under the First Schedule, the special duty of excise leviable under the Second Schedule, or as the case may be, the additional duty leviable under the Customs Tariff Act, 1975 has already been paid; and
(ii) no credit under rule 3 or rule 11 of the CENVAT Credit Rules, 2002 has been availed in the process of dyeing printing, bleaching or mercerising in the manufacture of dyed, printed, bleached or mercerised yarn.
From the above condition 31(i), it can be seen that the dyed yarn is concessionally exempted if manufactured out of texturised yarn on which duty of Excise was paid. In the fact of the present case, the Dyed Polyester Filament Yarn was manufactured out of duty paid texturised yarn. Though after purchase the duty paid texturised yarn, it is first used in the process of twisted yarn which in turn used in the manufacture of Dyed Polyester Filament Yarn. There is no dispute the dyed yarn was manufactured out of duty paid texturised yarn, accordingly the condition of notification stand complied with, merely because at the intermediate stage twisted yarn made that does not alter the duty paid character of the principal yarn i.e. texturised yarn. The judgment cited by the Learned Counsel directly covers the issue in favour of the respondent. In the case of Kejariwal Yarns Pvt. Ltd. (supra) this Tribunal has held as under:-
2.?We have carefully considered the submissions made by both sides. Admittedly, during the relevant period, the appellant had availed benefit of the notifications in question. The condition required to be fulfilled for availing benefit of above notifications is as under :
(i) Manufactured out of textured or draw-twisted yarn falling under Chapter 54 of die First Schedule on which the appropriate duty of Excise under the First Schedule, the special duty of Excise leviable under the Second Schedule to the Central Excise Tariff Act, 1985 has already been paid; and
(ii) No credit under Rule 3 or Rule 11 of the Cenvat Credit Rules, 2001 has been availed in the process of dyeing, printing, bleaching or mercerizing in the manufacture of dyed, printed, bleached or mercerized yarn.
3.?As per the Revenue, the said condition does not stand fulfilled inasmuch as the appellant had manufactured dyed twisted yarn out of twisted yarn on which no duty was paid. On the other hand, it is the appellants contention that the starting raw material for manufacture of dyed twisted yarn was duty paid texturised yarn on which they have not availed any Modvat credit. Coming into existence of twisted yarn is an intermediate stage, which cannot be held to be the starting point. The basic and starting raw material for manufacture of dyed yarn is duty paid texturised yarn which is subsequently twisted before dyeing of yarn.
4.?We find considerable force in the above contention of learned advocate. Admittedly, the starting raw material is the duty paid texturised yarn which stand turned into an intermediate product i.e. Twisted yarn which in turn is captively used in manufacture of dyed yarn. It is well settled that if A is used in the manufacture of B, which in turn is used in manufacture of C, it can be safely concluded that A has been used in manufacture of C. Admittedly, A is duty paid, and no credit has been availed by the appellant. That being so, an inevitable conclusion would be that the condition of notification stand satisfied by the appellant.
5.?We also note that an identical condition in Notification No. 6/2002-C.E. was the subject matter of the Tribunals decision in case of Precot Mills Ltd. v. CCE, Bangalore, 2005 (183) E.L.T. 407 (Tri.-Bang.). Tribunal while dealing with the said issue, has held in favour of the assessee by observing as under:
6.?We have carefully considered the rival contentions. The point to be decided in this case is whether the appellant is entitled to claim exemption under Sl. No. 97 in respect of the dyed yarn manufactured out of the doubled yarn which availed complete exemption from duty. The decision on this point involves the interpretation of the following expression used in condition 19(ii) of the Notification No. 6/2002:-
If manufactured out of yarn on which appropriate duty of excise has already been paid. It is true that the dyed yarn was manufactured out of the doubled yarn on which no duty was paid. But it is also true that the dyed yarn was manufactured, out of doubled yarn manufactured out of single yarn on which duty had already been paid. Hence, if a question is asked whether the dyed yarn is manufactured out of the duty paid yarn, answer would be YES. The dyed yarn was manufactured out of single yarn on which, duty was paid even though at the doubling stage, exemption was availed. There is no condition that the yarn should have suffered duty at every stage. In other words there is no condition that if doubled yarn is subject to the process of dyeing, the dyed yarn is entitled for exemption only if at the doubling stage duty had been discharged. Moreover, the appellants contended that even if the duty is paid at the doubling stage, Cenvat credit can be availed for clearance of dyed yarn and in effect there would be revenue neutrality. In these circumstances, the appellants interpretation of condition 19(ii) appears to be correct. In view of these observations, we allow the appeal with consequential relief.
6.?By following the ratio of law as declared in the above decision, we hold that the condition of notification stand fulfilled and the impugned order confirming demand of duty is required to be set aside.
7.?Apart from the merits of the case, we also note that the demand is barred by limitation having been raised beyond the normal period of one year. Admittedly, the benefit of the concessional rate of duty in terms of notification was being availed by the appellant after making declaration to the department and after making entries in the statutory records. The reasoning of the Commissioner that by claiming conditional exemption, which the appellant knew were only applicable to dyed twisted polyester yarn if manufactured out of texturised or dyed twisted yarn on which appropriate duty of Central Excise have already been paid, the appellant had made misdeclaration, is not appreciated by us. (It is well settled that the claim of exemption cannot be held to be misrepresentation. The appellant having made claim, it was for the Revenue to adjudge as to whether such claim was available or not. We, accordingly, hold that there is no suppression or misstatement on the part of the appellant with an intent to evade payment of duty so as to invoke longer period of limitation).
8.?In view of the above, appeals are allowed on merit as also on limitation with consequential relief to the appellants. In the case of Precot Mills Ltd. (supra) this Tribunal decided the identical issue the same has reproduced below:-
5.?The Revenue relied on the decision of the Apex Court in the case of CCE, Vadodara v. Dhiren Chemical Industries [2002 (139) E.L.T. 3 (S.C.)] and maintained that the doubled yarn did not suffer any duty and hence, the benefit of Notification No. 6/2002 under Sl. No. 97 will not be applicable to the dyed yarn which is converted from doubled yarn. While giving comments on the appeal, the Revenue has observed that the appellants contention that if the duty is paid at the doubling stage, they would be eligible for the CENVAT Credit of the same at the dyeing stage and in effect, it would be revenue neutral appears to be correct.
6.?We have carefully considered the rival contentions. The point to be decided in this case is whether the appellant is entitled to claim exemption under Sl. No. 97 in respect of the dyed yarn manufactured out of the doubled yarn which availed complete exemption from duty. The decision on this point involves the interpretation of the following expression used in condition 19 (ii) of the Notification No. 6/2002 :-
If manufactured out of yarn on which appropriate duty of excise has already been paid. It is true that the dyed yarn was manufactured out of the doubled yarn on which no duty was paid. But it is also true that the dyed yarn was manufactured out of doubled yarn, manufactured out of single yarn on which duty had already been paid. Hence, if a question is asked whether the dyed yarn is manufactured out of the duty paid yarn, answer would be YES. The dyed yarn was manufactured out of single yarn on which, duty was paid even though at the doubling stage, exemption was availed. There is no condition that the yarn should have suffered duty at every stage. In other words there is no condition that if doubled yarn is subject to the process of dyeing, the dyed yarn is entitled for exemption only if at the doubling stage duty had been discharged. Moreover, the appellants contended that even if the duty is paid at the doubling stage, Cenvat credit can be availed for clearance of dyed yarn and in effect there would be revenue neutrality. In these circumstances, the appellants interpretation of condition 19(ii) appears to be correct. In view of these observations, we allow the appeal with consequential relief. From the above Tribunal decision the issue is no longer res integra. The Learned Commissioner (Appeals) in his order given the following findings:-
05. I have carefully gone through the appeal memo; written/oral submissions made by appellant and also the provisions of law relating to subject matter. In these appeals the issue is common, hence being examined in the single Order-In-Appeal. The issue is the interpretation or condition No. - 31 specified against S.No. 126 of the Notfn.No. 06/2002 C'.Ex. eluted 01.03.2002. In order to avail the concessional rate of duty as per S.No. 126 of Notfn. No. 06/02 dated 01.03.02 the condition No. 31 is to be fulfilled, which states that :-
(i) manufactured out of textured or draw-twisted yarn, falling under Chapter 54 or the First Schedule on which the appropriate duty of excise under the First Schedule the special duty or excise leviable under the Second Schedule or as the case may be, the additional duty leviable under the Customs Tariff Act. 1975 has already been paid; and
(ii) No credit under Rule 3 or Rule II of the Cenvat Credit Rules, 2002 has been availed in the process or dyeing, printing, bleaching or mercerizing in the manufacture or dyed, printed, bleached or mercerized yarn. According to Revenue, when "Dyed Texturised Yarn" is cleared in terms or Notifn. No. 06/02 CEX dated 01.03.02 (S.No.126) which is made out of 'Twisted Yarn' which attracts 'NIL rate of duty. Thus, the exemption will not be available if inputs are exempted from excise duty or subject to 'NIL' rate of excise duty. Therefore, the appellants have not fulfilled the conditions and arc not entitled for benefit under S.No.126 of Notfn. No. 06/02 dated 01.03.02. I find that the appellants have manufactured dyed yarn out of duty paid texturised polyester filament yarn without availing input stage cenvat credit and this is not disputed by the department either in the show cause notice or in the order-in-original. The relevant exemption Notifications provides exemption to dyed yarn if manufactured out of duty paid texturised yarn without availing input stage credit. Accordingly, the appellants have satisfied the condition of the Notfn. and availed the exemption. The department has purported to deny the exemption only on the ground that they have manufactured the dyed yarn out of exempted twisted yarn and therefore not entitled for exemption. It is seen from the condition No.3l from the exemption notfn. that the words "appropriate duty of excise has already been paid" is with reference to texturised yarn. Therefore, the appellants have rightly contended that the question of proving duty paid character of twisted yarn does not arise. Further, there is also substantial force in their contention that the twisted yarn also requires to be considered as duty yarn being exempted only if made out or duty paid texturised yarn.
6. In the case of M/s. KR Steel Union Vs. CC [ELT 273 (SC 3 member bench)], it was held that an exemption notification cannot be read in a narrow manner so as to defeat the object of the notification. In the case of CCE Vs. M/s. Acer India Ltd. [(2004) 172 ELT 289 (SC 3 member bench)], the following principles were summarized for interpretation of taxing/fiscal statute - (a) No one can be taxed by implication (b) While construing a taxing statute existing marker practice may also be taken into cosideration (c) Provision enacted for benefit of assessee should he so construed which enables the assessee to gel its benefit (D) Even in taxation statute principle of purposive construction will be adhered to when a literal meaning may lead to absurdity. In the case of CCE Vs.. M/s. Himalayan Coop Milk Product Union Lid. [122 ELT 327 (SC)], it was held that exemption notifications have a purpose and policy decision behind it. Such purpose should not be defeated. In the case of M/s. Belapur Sugar Vs CCE (lO8 ELT 9], it was held that unless there is anything contrary in the Act, Rules or Notification, if there be two possible interpretations, it is that interpretation which sub serve the object and purpose should be accepted. In view of' facts and circumstances of the instant case the ratio or above said judgments is applicable. The exemption notfn. has to be read in its entirety and not in part, hence benefit of exemption cannot be denied.
07. Further, I also find that the ratio of the relied upon judgment in the case of M/s Precot Mills Ltd. Vs. CCL Bangalore [2005 (183) ELT 407 (Tri. - Bang.) is squarely applicable in aforesaid cases. The Hon'blc CESTAT while examining the exemption of dyed yarn. Chapter No. 55 under Notfn. No. 6/2002-CE dated 01.03.02 (Sr.No. 97) with condition No.19) held that the exemption was available to the dyed yarn when made out or intermediate exempted double yarn converted from the single yarn on which the appropriate duty was discharged. In the instant case dyed yarn of Chapter No.54 is admittedly manufactured out or duty paid texturised yarn and therefore exemption to dyed yarn cannot be denied simply on account of use of intermediate exempted twisted yarn. The relied upon case law fully covers the disputed issue. On the same analogy in the instant case it can be construed that 'Dyed Twisted Yarn' was manufactured out of textured or draw twisted yarn railing under Chapter 54 on which appropriate duty of excise has been paid and no credit is availed in the process or dyeing, The condition of the Notfn. requires only to prove the duty paid character or texturised yarn taken as basic raw material for the purpose of dyeing. There is no condition in the Notfn. that twisted yarn cannot undergo further process of twisting before dyeing. In the circumstances, the appellants interpretation of condition No. 31; Sl. No. 126 of Notfn. No. 06/02 dated 01.03.2002 appears to be correct. In view of above facts and circumstances. I find no reason to sustain the said Order-in-Originals. I therefore, hold that the appellants have correctly availed the exemption Notfn. No. 06/2002-CE dated 01.03.02 on dyed yarn (Sr.No. 126 read with condition No.31) as there is no dispute that same was manufactured out or texturised yarn on which appropriate duty of excise has already been paid and manufactured without availing input stage credit in the process of dyeing.
08. I set aside all the impugned Order-in-Original and allow the appeals with consequential relief if any. From the above findings, we observed that the Learned Commissioner (Appeals) has correctly examined the issue and accordingly allowed the appeal of the respondent. As per the above discussion and following the decision in the case of Kejariwal Yarns Pvt. Ltd. (supra) and Precot Mills Ltd. (supra) the impugned order does not require any interference. Therefore the same is upheld, the Revenue appeal is dismissed.
(Pronounced in Court on 02.12.2016) (C.J. Mathew) (Ramesh Nair) Member (Technical) Member (Judicial) Sp 10 APPLICATION NO. E/CO/350/06 APPEAL NO. E/3271, 3278/05 & E/86154/13-Mum