Custom, Excise & Service Tax Tribunal
Mafatlal Industries Ltd vs Commissioner Of Central Excise on 1 December, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT No. I Appeal No. E/2163/05 (Arising out of Order-in-Appeal No. BR(2735)117/M.I./2005 dated 18.04.2005 passed by Commissioner of Customs (Appeals), Mumbai I) For approval and signature: Honble Mr. M.V. Ravindran, 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 of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
Mafatlal Industries Ltd.
Appellant Vs. Commissioner of Central Excise Mumbai I Respondent Appearance:
Shri T.C. Nair, Advocate for appellant Shri N.N. Prabhudesai, Supdt. (AR) for respondent CORAM:
Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical) Date of Hearing: 01.12.2015 Date of Decision: 01.12.2015 ORDER NO Per: M.V. Ravindran This appeal is directed against order-in-appeal BR(2735)117/M.I./2005 dated 18.04.2005.
2. Brief facts of the case are that the appellant was a composite mill engaged in the manufacture of yarn and grey fabrics; entire production of grey fabrics was exclusively for export and only marginal quantity of the production was removed to their multi locational unit and local sales. Appellant used to procure duty paid yarn produced locally and were using the same for the manufacture of grey fabrics. Appellant did not execute any bond for export of the grey fabrics as required on an understanding that the clearances were exempted from payment of duty. The issue involved in this case is grey fabrics which was exported by the appellant being exempt from payment of duty by virtue of Notification No. 05/98 dated 02.06.1998 and availed CENVAT credit of the duty paid on yarn and was not maintaining separate accounts, appellant was issued a show-cause notice for demand of 5% or 10% of the value of goods cleared for export, which were exempted. Appellant resisted the show-cause notice. Adjudicating authority after following due process of law, confirmed the demands along with interest and imposed penalties. Appeal preferred against such an order also met with the same fate.
3. Learned Counsel after taking us through the Notification No.05/98 and the entire case records submits that by the said Notification, the grey fabrics were exempted from payment of duty if it is purchased for processing by another factory held by the same Limited Company. It is his submission that the issue involved in the case in hand is in respect of grey fabrics exported without any bond being executed and letter of undertaking given during the period December 1998 to November 1999. He would submit that both the lower authorities have mis-directed themselves inasmuch the provisions of Rule 57C has been applied for demanding the amount while the provisions of Rule 57CC of Central Excise Rules, 1944 would be applicable. He would then takes us through the provisions of Rule 57CC and more specifically to the sub-rules (3) and (5) and submits that they have complied with the conditions of the Rule 57CC in toto. He would submit that despite this, the first appellate authority has held that appellant is required to pay 5% or 10% as the case may be as the goods cleared for export were exempted and they had availed CENVAT credit on yarn procured locally.
4. Learned D.R. would submit that appellant should not have availed the CENVAT credit of the duty paid on yarn for a simple reason that the said yarn was exclusively used for the manufacturing of grey fabrics and grey fabrics were exempted from payment of duty. He would then draw our attention to the provisions of Rule 57C as also the Rule 57CC of Central Excise Rules, 1944 and submit that having not maintained separate records, the CENVAT credit availed on the goods i.e. yarn, they are liable to reverse the entire amount of CENVAT credit and the extended period was correctly invoked.
5. We have considered the submissions made at length by both sides and perused the records.
6. The issue involved in this case is whether the appellant has correctly availed the CENVAT credit on yarn which was purchased locally on payment of duty or otherwise; that whether the appellant is required to be directed to pay an amount which is equal to 5% or 10% of the value of the finished goods which were exempted and cleared for export.
6.1 There is no dispute as to the facts of the case that appellant is composite mill, manufacture their own yarn and also procure yarn from outside on payment of duty. The yarn which is manufactured and the yarn which procured from outside are used together for the manufacturing of grey fabrics and are exclusively cleared for export. It is the claim of the department that grey fabrics manufactured by the appellant being exempted, CENVAT credit availed for yarn consumed for such grey fabrics needs to be reversed along with interest and penalties needs to be imposed or discharge 5% or 10% of the value of finished goods.
6.2 At the outset we find that both the lower authorities as well as the learned D.R. are incorrect in their submissions and the findings for more than one reason.
6.3 Firstly, the provisions of Rule 49A of Central Excise Rules, 1944 talks about discharge of duty liability on the yarn manufactured within the factory and consumed in the manufacturing of grey fabrics along with interest. It is undisputed that appellant herein has complied with the conditions mandated under Rule 49A of the Central Excise Rules, 1944. In short, by doing so appellant has discharged duty liability on yarn which is manufactured in-house.
6.4 Secondly, we find that the yarn which is procured by them locally is duty paid remains undisputed and they are eligible to avail CENVAT credit is also undisputed.
6.5 The only question Revenue raises is of disallowing the CENVAT credit on the ground that the yarn which is procured is used for grey fabrics which is exempted. We find that the appellant has used locally procured yarn as well as in-house manufactured yarn for manufacturing of grey fabrics which are either exported or consumed in their own sister unit. If that be so when the clearances are effected to the sister unit appellant availed the benefits of Notification 05/98-CE and paying concessional rate of duty of 5%, hence it cannot be said that appellant had manufactured only exempted goods out of the duty paid yarn purchased by them. It is also on record that the appellant had exported the balance grey fabrics. In our view the provisions of Rule 57C will not apply in this case. The provisions of Rule 57CC will be applicable, we reproduce the relevant sub-rules.
Rule 57CC (1) Where a manufacturer is engaged in the manufacture of any final product which is chargeable to duty as well as in any other (final product which is exempt from the whole of the duty of excise leviable there on or is chargeable to nil rate of duty) and the manufacturer takes credit of the specified duty on any inputs (other than inputs used as fuel) which is used or ordinarily used in or in relation to the manufacture of both the aforesaid categories of final products, whether directly or indirectly and whether contained in the said final products or not, the manufacturer shall, unless the provisions of sub-rule (9) are complied with, pay an amount equal to eight per cent. Of the price (excluding sales tax and other taxes, if any, payable on such goods) of the second category of final products charged by the manufacturer for the sale of such goods at the time of their clearance from the factory.
(3) The provisions of sub-rule (1) shall not apply to final products falling under Chapters 50 to 63 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986).
(5) In the case of final products referred to in sub-rule (3) or (4) and excluded from the provisions of sub-rule (1), the manufacturer shall pay an amount equivalent to the credit of duty attributable to inputs contained in such final products at the time of their clearance from the factory.
(9) In respect of inputs (other than inputs used as fuel) which are used in or in relation to the manufacture of any goods, which are exempt from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty, the manufacturer shall maintain separate inventory and accounts of the receipt and use of inputs for the aforesaid purpose and shall not take credit of the specified duty paid on such inputs. 6.6 It can be seen from the above reproduced provisions of Rule 57CC, sub-rule (3) specifically talks about non applicablity of the provisions of sub-rule (1) for the products falling under Chapter 50 63 of the Schedule to the Central Excise Tariff Act, 1985 which is the case in hand. Hence the provisions by sub-rule (3) of Rule 57CC are directly applicable which are governed of sub-rule (5) wherein it is very clearly stated that manufacturer shall pay an amount equivalent to the credit of duty attributable to inputs contained in such final products at the time of their clearance from the factory. In the case in hand there is no dispute as to the fact that the appellant had paid duty on grey fabrics cleared to home consumption and when the grey fabrics are cleared for export which consumed yarn, they paid the duty as per the provisions of Rule 49A of Central Excise Rules, 1944.
6.7 In our considered view, the first appellate authority has not considered this submission in its correct perspective.
6.8 Thirdly, we do find strong force in the contentions raised by learned Advocate that for the purpose of export, non-execution of bond or LUT may not be required as long as the goods are cleared for export or exported.
6.9 We find that in the case in hand there is no dispute that the grey fabrics which were manufactured and cleared for export, are exported. The ratio of the judgement of this Tribunal in the case of Well Known Polyesters Ltd. v. CCE 2011 (267) ELT 221 (Tri. Ahmd.) would cover the issue in hand. The ratio is in para 6 which we reproduce.
6. The second? ground taken for rejection of the refund claim is that refund under Rule 5 of Cenvat Credit Rules, 2004 is permissible only if the dutiable goods are exported under bond or LUT. Since the appellant is availing full exemption and not even registered and the exempted goods were not exported under bond, refund has been denied. This issue was considered by the Honble High Court of Himachal Pradesh in the case of CCE v. Drish Shoes Limited - 2010 (254) E.L.T. 417 (HP) and the Honble High Court held that refund of input credit is admissible when exempted goods are exported without execution of bond. Similar was the view taken by the Honble Bombay High Court in the case of Repro India Limited v. UOI [2009 (235) E.L.T. 614 (Bom.)]. Therefore, the conclusion in the impugned order that appellant is not eligible for exemption since the goods have not been exported under bond or LUT, cannot be sustained.
6.10 It can be seen on merits as well as on ratio of the judgement, the issue is squarely settled in favour of the appellant.
7. In view of the foregoing, we set aside the impugned order and allow the appeal with consequential relief, if any.
(Dictated in Court) (C.J. Mathew) Member (Technical) (M.V. Ravindran) Member (Judicial) nsk ??
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1 10Appeal No. E/2163/05