2014 (3) TMI 376 - AT - Central Excise

Denial of exempted from payment of duty in terms of Notification No. 30/2004-C.E. - Appellant were manufacturing both dutiable as well as exempted final products, they were availing credit of duty paid on the inputs, used in both types of their final products - However, at the time of clearance of exempted yarn, they were reversing 5% of the amount in terms of the provisions of Rule 6(3)(b) of Cenvat Credit Rules - Held that - NEY 210 denier attracts the tariff rate of duty at 8% of the value of the same. Even if we are prima facie agree with the Revenue s stand that the benefit of Notification No. 30/2004 is not available to them, we note that there was an alternative Notification No. 29/2004-C.E. The said notification provides concessional rate of duty of 4%, subject to availment of credit. As such, even if it is held that the appellant has availed credit of duty paid on the inputs, the effective rate of duty would be 4%, in terms of Notification No. 29/2004. Admittedly, the appellant at the time of clearance of their goods had paid back 5% of the credit availed by them, which is admittedly more than the effective rate of duty - Notification No. 29/2004 would prima facie cover the disputed issue but we find that the applicability of the said notification was not examined by the adjudicating authority as the appellant did not place reliance on the same - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of Notification No. 30/2004-C.E. regarding duty exemption for Nylon Filament Yarn.
2. Alleged violation of conditions of the notification by availing credit of duty paid on inputs.
3. Application of alternative Notification No. 29/2004-C.E. providing concessional rate of duty.
4. Decision on demand of duty and penalty imposed by the Commissioner.

Issue 1 - Interpretation of Notification No. 30/2004-C.E.: The appellant, engaged in manufacturing Nylon Filament Yarn, availed credit of duty paid on inputs used in both dutiable and exempted final products. However, they reversed 5% of the amount at the time of clearance of exempted yarn as per Rule 6(3)(b) of Cenvat Credit Rules. The Revenue contended that by initially availing the credit, the appellant violated the condition of Notification No. 30/2004, which disallowed such availment. Consequently, a demand of duty of Rs. 1,28,31,416/- was raised for the period October 2009 to December 2010, along with a penalty of the same amount.

Issue 2 - Alleged Violation of Notification Conditions: The Revenue argued that the appellant's initial availment of credit rendered them ineligible for the benefit of duty exemption under Notification No. 30/2004. The Tribunal noted that the Nylon Filament Yarn in question attracted a tariff rate of 8% duty. While acknowledging the Revenue's stance, the Tribunal pointed out an alternative Notification No. 29/2004-C.E., which offered a concessional rate of 4% duty, subject to credit availment. Despite the appellant's credit utilization, the effective duty rate would be 4% under this notification. As the appellant had paid back 5% of the credit at clearance, exceeding the effective duty rate, the Tribunal provisionally concluded that the appellant should be granted an unconditional stay.

Issue 3 - Application of Notification No. 29/2004-C.E.: The Tribunal observed that although Notification No. 29/2004 could potentially cover the disputed issue, the adjudicating authority had not examined its applicability due to the appellant's failure to rely on it. Consequently, the Tribunal decided to set aside the impugned order and remand the matter to the Commissioner for a thorough examination of the applicability of Notification No. 29/2004. The stay petition and appeal were disposed of accordingly.

Issue 4 - Decision on Demand of Duty and Penalty: The Tribunal's analysis focused on the interpretation of the notifications and the appellant's compliance with the duty payment requirements. By highlighting the alternative notification and the appellant's actions regarding credit utilization, the Tribunal concluded that a more detailed examination was necessary to determine the correct application of the notifications. Therefore, the Tribunal set aside the demand of duty and penalty imposed by the Commissioner, opting for a comprehensive review of the case based on the relevant notifications.