2001 (10) TMI 940 - AT - Central Excise

Summary

Issues Involved:
1. Whether clearances under Rule 191BB amount to clearance of exempted goods.
2. Whether duty can be demanded on the intermediate product, i.e., Nylon yarn, used to make Nylon Tyre Cord fabrics cleared under Rule 191BB.

Issue-wise Detailed Analysis:

1. Whether clearances under Rule 191BB amount to clearance of exempted goods:

The appellant argued that clearances under Rule 191BB do not amount to clearance of exempted goods. They cited the Tribunal's decision in the case of Orissa Synthetics Ltd. v. CCE, which held that clearance under Rule 191BB does not constitute clearance of exempted goods. The Tribunal referenced a circular issued by the CBEC, stating that exempted goods refer to those cleared under an exemption Notification issued under Rule 8 (now Section 5A), and that Notification No. 33/90-C.E. (N.T.) is not an exemption notification.

The Tribunal concluded that the scope of Rule 57C does not extend to cases of removal of goods without payment of duty under a Notification issued under Rule 191BB. This interpretation aligns with the Delhi High Court's decision in Hindustan Aluminium Corporation Limited v. Collector of Central Excise, which clarified that goods exported in bond cannot be treated as exempted from payment of duty or chargeable to a nil rate of duty. The Tribunal further noted that the Ministry of Finance's circular supports this view, emphasizing that removals under a Notification not being an exemption Notification do not equate to exemption from the whole of duty or chargeability to nil rate of duty.

2. Whether duty can be demanded on the intermediate product, i.e., Nylon yarn, used to make Nylon Tyre Cord fabrics cleared under Rule 191BB:

The Commissioner of Central Excise, Madras, demanded duty on the Nylon yarn used in the manufacture of Nylon Tyre Cord fabrics, arguing that the intermediate goods (Nylon yarn) were not exempted from payment of duty either under the Notification for captive consumption or any other provisions of the Central Excise Rules. The appellants contended that the clearance of Nylon Tyre Cord fabrics to M/s. MRF Limited under Rule 191BB, which were subsequently exported, should not attract duty on the intermediate product (Nylon yarn).

The Tribunal agreed with the appellants, stating that no duty can be demanded on the intermediate product (Nylon yarn) used to manufacture Nylon Tyre Cord fabrics cleared under Rule 191BB. The Tribunal emphasized that the procedure prescribed by the Government of India under Rule 191BB aims to facilitate and encourage export without payment of duty, avoiding unnecessary paperwork. The Tribunal referenced its previous judgment in the appellant's own case, where it was held that since the finished product is not exempted from payment of duty by virtue of Notification No. 30 issued under Rule 5A(1), Modvat credit cannot be denied under Rule 57C for clearances made under Rule 191B/191BB.

The Tribunal concluded that the learned Commissioner misdirected himself in demanding duty on the intermediate product (Nylon yarn) and set aside the impugned order, allowing the appeal with consequential relief.