2010 (8) TMI 312 - AT - Central Excise

Appeal new plea at Tribunal stage - Rule clearly requires the appellants to confine to the grounds of challenge disclosed in the memo of appeal - appellants can raise new grounds subject however to the leave in that regard being obtained from the Tribunal - appellants have not obtained any such leave - appellants has not disclosed any reason for not raising the ground at any earlier point of time Regarding composite mill - in order to constitute a factory to be a composite mill, the manufacturer therein should be one who is engaged in processing of fabrics alongwith spinning of yarn from fibres and weaving or knitting or crocheting of fabrics within the same factory. - a factory cannot constitute a composite mill unless there is processing of fabrics alongwith spinning of yarn from fibres and there is payment of appropriate excise duty the appellants claim about composite mill is totally devoid of substance. When the notification itself defines the term for the purpose of claiming benefit under notification, it is not permissible to take resort to the definition of similar word in some other notification. Appeal dismissed

Issues Involved:
1. Entitlement to concessional duty under Notification No. 14/2002-C.E.
2. Definition and qualification of a composite mill.
3. Applicability of Notification No. 6/2002-C.E. (N.T.)
4. Imposition of penalty for non-compliance.

Issue-wise Detailed Analysis:

1. Entitlement to Concessional Duty under Notification No. 14/2002-C.E.:
The appellants were engaged in the manufacture of man-made processed knitted fabrics and were paying duty at a concessional rate under Notification No. 14/2002-C.E. The notification prescribed a concessional rate of 8% basic excise duty plus 4% additional excise duty, totaling 12% ad valorem duty, subject to the condition that the goods were made from textile fabrics on which appropriate duty of excise had been paid. However, the raw materials used by the appellants were exempt from excise duty, and thus the condition for concessional duty was not fulfilled. A show cause notice was issued, and the demand for Rs. 69,216/- along with interest and a penalty of an equal amount was confirmed by the Assistant Commissioner, Ludhiana, and upheld by the Commissioner (Appeals), Ludhiana.

2. Definition and Qualification of a Composite Mill:
The appellants claimed that their factory was a composite mill and thus entitled to the benefit under Notification No. 14/2002-C.E. They relied on Tribunal decisions and Circular No. 680/71/2002-CX., dated 10-12-2002. However, the authorities did not consider this aspect, and the appellants did not raise this ground in their initial appeals or in their defense to the show cause notice. The Tribunal noted that Rule 10 of CESTAT Rules, 1982, requires appellants to confine to the grounds of challenge disclosed in the memo of appeal unless leave is obtained from the Tribunal. The appellants failed to obtain such leave and did not raise the composite mill argument at the earliest opportunity, thus violating principles of natural justice.

3. Applicability of Notification No. 6/2002-C.E. (N.T.):
The appellants alternatively argued that they were entitled to benefits under Notification No. 6/2002-C.E. (N.T.) as held by the Delhi High Court in the case of Commissioner of Central Excise v. M.B. Dyers. However, the Tribunal noted that the definition of a composite mill under Notification No. 6/2002 is different from that under Notification No. 14/2002. The Delhi High Court's decision was specific to Notification No. 6/2002 and related to cenvat credit, which was not applicable to the current case. The Tribunal emphasized that an exemption notification must be understood in its own terms without reference to definitions in other notifications.

4. Imposition of Penalty for Non-compliance:
The Tribunal found that the appellants had illegally sought to avail the benefit of Notification No. 14/2002 without fulfilling the required conditions. The appellants did not disclose all relevant facts and failed to prove their entitlement to the concessional duty. Consequently, the imposition of a penalty was justified, and the question of non-imposition of penalty did not arise.

Conclusion:
The Tribunal dismissed the appeal, concluding that the appellants were not entitled to the benefit of Notification No. 14/2002-C.E. as they did not meet the conditions specified therein. The claim of the appellants regarding their factory being a composite mill was not substantiated, and the alternative claim under Notification No. 6/2002-C.E. (N.T.) was not applicable. The imposition of the penalty was upheld due to the appellants' non-compliance and failure to disclose all necessary facts.

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