1998 (6) TMI 535 - AT - Central Excise

Cenvat/Modvat - Inputs - Permission for removal - Adjudication - Availability of notification or procedure - Appeal to Appellate Tribunal - Grounds - Cenvat/Modvat - Inputs

Issues:
1. Validity of permission granted under sub-rule (2) of Rule 57F for removal of goods.
2. Double payment of duty on texturised yarn.
3. Duty implications on exported goods.
4. Recovery of duty short-paid or not paid.
5. Effect of permission withdrawal on duty recovery.
6. Estoppel against law and permission validity.
7. Consideration of Rule 56A availability.
8. Refusal to consider Rule 56A by the Collector.
9. Arguments not raised before the Collector.
10. Verification of factual aspects for duty implications.
11. Setting aside the order in appeal for further adjudication.

Analysis:

1. The judgment revolves around the validity of the permission granted to an appellant company for the removal of polyester yarn (POY) under sub-rule (2) of Rule 57F. The company cleared texturised yarn without duty payment, leading to a demand for duty recovery after the permission was withdrawn. The Collector held that the permission was invalid as POY was not a notified input, confirming the duty demand.

2. The appellant contended that the duty structure implied duty payment only on POY, not on texturised yarn made from duty-paid POY. Citing precedents, the appellant argued against double duty payment and emphasized the notifications and provisions of Rule 56A for duty payment only once.

3. Regarding exported goods, the appellant argued that duty was not payable on POY texturised and exported, citing specific provisions allowing clearance without duty payment for export goods and rebate of duty if paid. The appellant highlighted rules enabling duty-free export of finished excisable goods.

4. The Department argued for duty recovery independently under section 11A, emphasizing the recovery of short-paid or unpaid duty. Reference was made to a Supreme Court decision supporting duty recovery and the necessity to verify duty payment on imported POY.

5. The judgment analyzed the effect of permission withdrawal on duty recovery, citing precedents where relief ceased only after formal withdrawal. The judgment emphasized the need to recover duty for goods cleared without payment, despite the permission being invalid ab initio.

6. The court rejected the appellant's claim of benefit from the invalid permission, emphasizing that no estoppel exists against the law. The permission granted was deemed contrary to law, and the appellant could not claim its benefits.

7. The availability of Rule 56A was raised, with the court noting the Collector's error in not considering this aspect. The court highlighted the necessity for the Collector to address this argument and provide a finding on its applicability.

8. The court criticized the Collector's refusal to consider the Rule 56A availability issue, emphasizing that the appellant could raise such arguments at any stage, requiring the Collector to address them.

9. The court noted that certain arguments were not raised before the Collector and directed the Collector to consider these arguments, including those related to Rule 56A availability, in the adjudication process.

10. The judgment stressed the verification of factual aspects, especially regarding duty implications on POY cleared without payment, exclusion of duty-free imported quantities, and correlation between POY and exported texturised yarn. The court highlighted the necessity for field-level verification to ensure compliance.

11. Ultimately, the order in appeal was set aside, and the Commissioner was directed to hear the appellant and adjudicate the matter according to law, emphasizing the need for a comprehensive review and verification of the factual and legal aspects involved in the case.

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