Custom, Excise & Service Tax Tribunal
M/S. Arora Knit Fabrics Pvt.Ltd vs Cce, Ludhiana on 20 May, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SCO 147-148, SECTOR 17-C, CHANDIGARH-160017 DIVISION BENCH COURT NO.1 Appeal No. E/1343/2005-EX(DB) [Arising out of the OIO No.99/Ldh/04 dated 20.1.05 passed by the CCE (Appeals), Ludhiana) Date of Hearing/Decision: 20.05.2016 For Approval & signature: Honble Mr.Ashok Jindal, Member (Judicial) Honble Mr.Raju, Member (Technical) 1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3. Whether their Lordships wish to see the fair copy of the order? seen 4. Whether order is to be circulated to the Department Authorities? Yes M/s. Arora Knit Fabrics Pvt.Ltd. Appellant Vs. CCE, Ludhiana Respondent
Appearance Ms.Krati Somani, Advocate- for the appellant Shri Sanjay Jain, AR- for the respondent CORAM: Honble Mr.Ashok Jindal, Member (Judicial) Honble Mr.Raju, Member (Technical) FINAL ORDER NO 60115/2016 Per RAJU:
The appellants M/s. Arora Knit Fabrics Pvt.Ltd. were issued a demand show cause notice for wrongly availed concessional rate of duty under Notification No.14/2002-CE dated 1.3.2002. The said notification, in terms of S.No.6 of table read with proviso (a) of the notification provided for concessional rate of duty subject to the condition that the goods were made from Textile Fabrics on which appropriate duty of excise [(BED and AED (GSI)] has been paid. It was alleged that the textile fabrics i.e. raw material/inputs out of which the said goods were manufactured were exempted from payment of duty of excise [(BED and AED (GSI)] in terms of S.No.14 of the Table of the Notification No.14/2002-CE dated 1.3.2002. Reliance was placed on the decision of Apex Court in the case of Dhirent Chemical Industries-2002 (139) ELT 3 (SC) wherein it has been held that the exempted goods attracting nil rate of duty cannot be treated as goods on which payment of duty at the appropriate rate has been made. The demand of duty was confirmed by the Commissioner. Being aggrieved with the said order, the appellants are in appeal before this Tribunal.
2. Learned Counsel for the appellants relied on the decision of larger bench of the Tribunal in the case of Arvind Products Ltd.-2014 (310) ELT 515 (Tri.-LB). He argued that in the said decision, the exactly the same condition of Notification No.14/2002-CE dated 1.3.2002 has been examined and it has been held that in the facts of the case, market purchases of the goods cannot be treated as non duty paid. He argued that the exemption to the raw material is a conditional exception an therefore, market purchases cannot be treated as non duty paid.
3. Learned AR relied on the impugned order.
4. We have gone through the rival submissions. We find that the larger bench of the Tribunal in the case of Arvind Products Ltd. (supra) was interpreting the very issue that are under dispute. In the instant case, the Tribunal in the said case has observed as under:-
8.3?However, we are of the considered view that natural expressions used in a statute should be understood in a simple and plain meaning of the expressions as commonly understood. However, a harmonious construction of a statue or provisions of an exemption notification has to be made when the expressions used does not convey a clear and unambiguous interpretation. In the present notification, Sr. No. 10 of table annexed to Notification No. 14/2002-C.E. exempts all goods knitted or crocheted fabrics of cotton subject to the condition that such fabrics is made out of yarn on which appropriate duty is paid and no credit is taken on inputs and capital goods. Similar condition exists in Sr. No. 12 of the same notification. The words like appropriate duty of excise leviable, read with any notification for the time being in force duty has been paid and no credit of duty paid on inputs or capital goods has been taken have been used in condition -3 pertaining to Sr. No. 12 of Notification No. 14/2002-C.E. All these expressions have been interpreted by various orders of CESTAT and Courts, including the Apex Court. On top of all this Explanation-II of Notification No. 14/2002-C.E. creates a fiction that for the purpose of condition of this notification taxable yarn or fabrics shall be deemed to be duty paid even without production of documents evidencing payment of duty. In view of the above, it can not be said as held inter alia by CESTAT in the case of Auro Textiles (supra) that a simple and plain reading of the exemption Notification No. 14/2002-C.E. is available. In the existing set of facts and circumstances a harmonious construction/interpretation is required to be made to understand the intention of the framers of Notification No. 14/2002-C.E. If a view is taken that all the goods lying in the market are non duty paid by virtue of Sr. No. 10 of Notification No. 14/2002-C.E. then Explanation-II to this notification becomes redundant. Secondly, by presuming that all categories of grey fabrics supplied to the appellants have not discharged any duty that interpretation will be like creating another fiction that all grey fabrics lying in the market are deemed not duty paid, unless established by an assessee availing exemption under Notification No. 14/2002-C.E. For a claim under Sr. No. 12 of Notification No. 14/2002-C.E., by an assessee, it can not be presumed that all grey cotton fabrics received by a textile processor is not duty paid because Sr. No. 10 of the same notification exists. It is also relevant to note that exemption under Sr. No. 10 of this exemption notification is not unconditional but is subject to certain conditions. Thus, the grey fabrics available in the market may not be 100% grey fabrics on which no duty has been paid. That is why a fiction is created under Explanation-II that for the purpose of condition of this notification textile yarn or fabrics shall be deemed to have duty paid even without production of duty paying documents. There is no expression like, except good which are clearly recognizable as non duty paid in Explanation-II of Notification No. 14/2002-C.E. to have any doubt.
8.4?In view of the observations made in Para 8.3 above, there is apparent conflict between Condition-3 and Explanation-II of the Notification No.14/2002-C.E., and has to be given a harmonious construction. For understanding the intention of the legislature behind this exemption we are of the considered opinion that one has to go to the Explanatory Notes and the speeches of the Finance Minister, if any, given at the time when exemption under Notification No. 14/2002 was issued. It is observed from the case records that Explanatory Notes of Budget Bulletin 2002 with respect to Notification No. 14/2002-C.E., dated 1-3-2002, under the heading II Textile Fabric clarified as follow :-
II. Textile Fabric Notification No. 14/2002-C.E., and 15/2002-C.E., both dated 1-3-2002 prescribes effective rates of duty of nil of 12% adv. in the case of textile fabrics subject to the condition that the goods should have been made from textile yarns of 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 paying documents as prescribed under the Cenvat Credit Rules. 8.5?It is evident from the above Explanatory Notes that framers of Notification No. 14/2002-C.E., wanted to extend the benefit of this exemption to the manufacturers subject to the only condition that no Cenvat credit is taken/not taking of such Cenvat credit was not only restricted to inputs but was also to capital goods. It is further clarified that benefit of rate of duty should be allowed without insisting upon any documentary proof of payment of duty. In view of the above legislative intent, we do not agree with the views expressed by CESTAT two Member judgment in the case of Auro Textile v. CCE, Chandigarh (supra) in Para 25 that reliance of the appellant on Explanatory Notes to Budget of 2002 can not be of any assistance to the assessee. It has been rightly argued by the Senior Advocate in the present proceedings that if the views of the Revenue are accepted than it will lead to chaos and absurdity because making a manufacturer to pay duty again after breaking Cenvat chain by not taking credit, will burden small processing manufacturers to pay duty again on the processed fabrics when no credit on inputs is taken. Indirectly all the textile processors will be forced to adopt Cenvat credit route only to avoid cascading effect of taxation. It will not be in the interest of Small operators to follow only the Cenvat credit mode.
8.6 ?In the case of UOI v. State of Tripura [AIR 2012 Supreme Court 3240],, Apex Court has held that any interpretation which leads to injustices and absurdity must be avoided and in such situations court may look into the purpose for which the statute has been brought and would try to give a meaning which would adhere to the purpose of that statute. Relevant Para 4 of this judgment is reproduced below :-
4.?Before we embark upon an enquiry as to what would be the correct interpretation of Section 28-A, we thin it appropriate to bear in mind certain basic principles of interpretation of statute. The rule stated by Tindal C.J. in Sussex Peerage case, (1844) 11 CI and F 85, still hold the field. The aforesaid Rule is to the effect :
If the words of the statute are in themselves precise and unambiguous, then no more can be necessary than to expound those words in their natural and ordinary sense. The words themselves do alone in such cases best declare the intent of the law giver. It is a cardinal principle of construction of statute that when language of the statute is plain and unambiguous, then the court must give effect to the words used in the statute and it would not be open to the courts to adopt a hypothetical construction on the ground that such construction is more consistent with the alleged object and policy of the Act. In Kirkness v. John Hudson and Company Limited, 1955 (2) All ER 345, Lord Reid pointed out as to what is the meaning of ambiguous and held that a provision is not ambiguous merely because it contains a word which in different context is capable of different meanings and it would be hard to find anywhere a sentence of any length which does not contain such a word. A provision is, in my judgment, ambiguous only if it contains a word or phrase which in that particular context is capable of having more than one meaning. It is no doubt true that if on going through the plain meaning of the language of statutes, it leads to anomalies, in justices and absurdities, then the court may look into the purpose for which the statute has been brought and would try to give a meaning, which would adhere to the purpose of the statute. Patanjali Sastri, C.J. in the case of Aswini Kumar Ghose v. Arabinda Bose, 1953 SCR 1 had held that it is not a sound principle of construction to brush aside words in a statute as being inapposite surplusage, if they can have appropriate application in circumstances conceivably within the contemplation of the statute. In Quebec Railway Light Heat and Power Company v. Vandray, AIR 1920 PC 181, It has been observed that the Legislature is deemed not to waste its words or to say anything in vain and a construction which attributes redundancy to the legislature will not be accepted except for compelling reasons. Similarly, it is not permissible to add words to a statute which are not there unless on a literal construction being given a part of the statute becomes meaningless. But before any words are read to repair an omission in the Act, it would be possible to state with certainity that these words would have been inserted by the draftsman and approved by the legislature had their attention been drawn to the omission before the Bill had passed into a law. At times, the intention of the legislature is found to be clear but the unskillfulness of the draftsman in introducing certain words in the statute results in apparent ineffectiveness of the language and in such a situation, it may be permissible for the court to reject the surplus words, so as to make the statute effective.. 8.7?In the case of GOI v. Indian Tobacco Association [2005 (187) E.L.T. 162 (S.C.)] also Honble Apex Court held that an exemption notification must be construed with regard to the object and purport it seeks to achieve. It was also laid in this judgment that an expression used in a statute should be given its ordinary meaning unless that meaning leads to anomalous or absurd situation. If the interpretation meant by the Revenue is accepted then every alternate stage of processing will be required to be taxed by virtue of Section 2(f) (ii) of the Central Excise Act, 1944 read with Chapter note 4 of Chapter 52 or Chapter 54 or Chapter 55 of the Central Excise Tariff Act, 1985. This will be an anomalous or absurd situation or else textile processors will be forced to avail Cenvat credit route alone to avoid cascading effect of taxation. In this context Explanatory Note of Budget Bulletin 2002 become relevant when it conveys that benefit of Notification No. 14/2002-C.E., should be available if no credit is taken by the manufacture. For such interpretation Explanation-II to Notification No. 14/2002-C.E., creating fiction of Deemed duty paid, becomes relevant and has to be harmoniously read with the conditions prescribed under Notification No. 14/2002-C.E. It is also a well accepted judicial discipline that if two interpretations of a statute are possible then the one more favourable to the tax payer should be taken.
9.?In view of the above observations we hold that decisions taken in the case of CCE, Ludhiana v. Prem Industries (supra), Simplex Mills Co. Limited v. CCE (supra) and Morarjee Gokuldas Spg. & Wvg. Co. Limited v. CCE (supra) were correct interpretation of exemption Notification No. 14/2002-C.E., dated 1-3-2002, Accordingly, benefit of Sr. No. 12 of Notification No. 14/2002-C.E., will be admissible to the appellants by considering the fabric received for processing as deemed duty paid as per Explanation-II of Notification No. 14/2002-C.E. Any other interpretation will make this explanation redundant. Further such a deemed fiction was not existing before the Honble Supreme Court while delivering judgment in the case of CCE v. Dhiren Chemicals Limited (supra).
5. In view of above fact that the decision of larger bench of the Tribunal in the case of Arvind Products Ltd. squarely covers the issue at hand, the appeal is allowed.
(Dictated & pronounced in the open court)
(Raju) (Ashok Jindal)
Member (Technical) Member (Judicial)
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