2011 (2) TMI 1003 - AT - Central Excise

Exemption under Notification No. 14/02-CE benefit denied - Held that - The issue involved in this case has been decided against in favour of the Revenue in case of Auro Textile vs. CCE, Chandigarh (2009 (11) TMI 447 - CESTAT, NEW DELHI) wherein it was held that explanation II to Notification No. 14/02-CE creates a legal fiction/ deeming provision by which the assessee is absolved of the primary burden of proving the duty paid nature of the grey fabric/yarn, but it cannot be interpreted to mean that where the product is subjected to nil rate of duty, the payment of duty is to be presumed and that to presume the payment of duty even in a case of no such payment has been made would amount to create a new legal fiction, which is not contemplated under the said notification. It was also held in this case that if the Department is able to show that the assessee has not paid any duty on the products specified in the condition, then the claim for benefit under the Notification could be denied - decided in favour of the Revenue.

Summary

Issues:
Interpretation of Notification No. 14/02-CE regarding duty exemption for Processed Man Made Knitted Fabrics.

Analysis:
The appellant, engaged in manufacturing Processed Knitted Fabrics, was clearing products at a concessional rate of duty under Notification No. 14/02-CE. The dispute arose as the Department sought to deny the duty exemption due to lack of evidence that the grey fabrics used in manufacturing were duty paid. The Assistant Commissioner confirmed duty demands, interest, and penalty, which was upheld by the Commissioner (Appeals), leading to the current appeal.

The Tribunal noted that the issue had been previously decided in favor of the Revenue in the case of Auro Textile vs. CCE, Chandigarh. It was held that while explanation II to the notification creates a legal fiction absolving the burden of proving duty payment, it does not presume payment of duty where products are subjected to nil rate. The Tribunal emphasized that if the Department can demonstrate non-payment of duty on the specified products, the benefit under the notification can be denied. As the issue was already settled in favor of the Revenue, the appeal was dismissed.

The judgment highlights the importance of complying with the conditions specified in notifications for availing duty exemptions. It clarifies that legal fictions do not extend to presuming duty payment in cases of nil rates, emphasizing the need for actual payment where required. This decision underscores the significance of substantiating duty payments to avoid denial of benefits and reinforces the authority's power to reject claims based on non-compliance with specified conditions.