2004 (4) TMI 482 - AT - Central Excise

Summary

Issues:
Interpretation of Notification No. 14/2002 and Circulars - Differential duty and penalty imposed by Commissioner of Central Excise, Nagpur - Benefit of Notification No. 14/2002 - Captive consumption of cotton yarn in the manufacture of Denim fabrics - Meaning of "appropriate duty" - Divergent views on interpretation of circulars and notifications.

Analysis:

1. The case involved a stay application arising from an order by the Commissioner of Central Excise, Nagpur, demanding a differential duty of Rs. 4,90,51,770/- under Section 11A and imposing a penalty of Rs. 30,00,000/- under Rule 25 of Central Excise Rules, 2002. The dispute primarily revolved around the interpretation of Notification No. 14/2002 and the meaning of "appropriate duty" concerning the captively consumed cotton yarn in the production of Denim fabrics.

2. The applicant, a manufacturer of cotton yarn and Denim fabrics, cleared a portion of the yarn on duty payment and used the rest for captive consumption in manufacturing Denim fabrics. The fabrics were cleared by paying duty under Notification No. 14/2002. The Commissioner held that the applicant did not pay the appropriate duty on the captively consumed yarn and demanded a differential duty. The issue centered on the conditions of the notification and the interpretation of the term "appropriate duty."

3. The applicant argued that a previous decision by the Commissioner of Central Excise (Appeals), Nagpur, allowed the benefit of Notification No. 14/2002 in similar circumstances. The divergent views on the interpretation of Circulars and Notifications, specifically Circular No. 667/52/2002-CX and Circular No. 680/7/2002-CX, were highlighted. The contention was that the clarificatory circular supported the applicant's entitlement to the notification's benefit even without discharging duty on captively consumed yarn.

4. The Joint CDR contended that the circulars did not support the applicant's case. It was argued that as the applicant used cotton fibre and yarn from the open market in manufacturing Denim, the final product did not qualify for the benefit of Notification No. 14/2002 due to the lack of appropriate duty payment on the inputs.

5. Upon examining the arguments, the Tribunal noted the contradictory views taken by different officers within the department regarding the interpretation of Notification No. 14/2002 and the circulars in question. The issue at hand primarily involved the conflicting interpretations of the notification and circulars. Consequently, the Tribunal allowed the stay application unconditionally, indicating the presence of substantial doubt and divergent views on the matter within the department.