2015 (11) TMI 93 - SC - Central Excise

Textile goods / Ready Made Garments (RMG) - article of apparel or clothing accessories - process of affixing a brand name or trade name / affixing lables after purchase of goods - Benefit of Exemption Notification No. 38/2003-CE dated 30th April, 2003 - Whether process undertaken by assessee fall within the processes that are mentioned in the Notification - Held that - For the purpose of arriving at the value of the job at the hands of job workers, factory gate is treated as deemed factory gate as if the processed fabric was sold by the assessee. It cannot be disputed that the fact situation in these cases is identical where the job workers had paid the excise duty at the time of supply of these processed fabric to the respondent assessees. Once that could be treated as sale, the necessary corollary is that so far as the assessees are concerned, they had purchased processed fabric from the job workers and, therefore, would satisfy the condition of subsequent purchase contained in Notification No. 38/2003. - this position is accepted even by the Department which can be discerned from Circular No. 737/53/2003-CX dated 19.08.2003. Though certain doubts for carrying out the obligation under Standards of Weights and Measures Act, 1976 were clarified by the said Circular, incidentally it touched upon this very process that is undertaken by the assessees herein and remarked that such process would be covered by Notification No. 38/2003 and would be fully exempt from payment of excise duty. - benefit of exemption notification is rightly extended by the Tribunal to the respondents-assessees - Decided against Revenue.

Issues:
1. Interpretation of Exemption Notification No. 38/2003-CE dated 30th April, 2003.
2. Determination of whether the processes undertaken by the assessees qualify for the exemption.
3. Clarification on the concept of "subsequent purchase" as per the Central Excise Act, 1944.
4. Application of a Constitution Bench Judgment in the case.
5. Consideration of Circular No. 737/53/2003-CX dated 19.08.2003 in relation to the exemption.

Detailed Analysis:

1. The Supreme Court addressed the interpretation of Exemption Notification No. 38/2003-CE dated 30th April, 2003, which provided an exemption for textile articles subjected to specific processes. The notification excluded the process of affixing a brand name or trade name after purchase of the goods. The case involved three assessees - M/s. Aditya Birla Nuvo Ltd., M/s. Levi Strauss (India) Pvt. Ltd., and M/s. Arvind Clothing Limited, who claimed the benefit of this notification, denied by the Commissioner initially.

2. The Court examined the processes undertaken by the assessees, as detailed by the Tribunal. The processes included labeling, repacking, alteration, and other activities to make the products marketable. The Tribunal confirmed that the processes aligned with those specified in the Notification, and there was no dispute regarding this aspect.

3. The Court delved into the concept of "subsequent purchase" under the Central Excise Act, 1944. The Department argued that the work assigned to job workers did not constitute a purchase by the assessees. However, the Court referenced a Constitution Bench Judgment in Ujagar Prints case, establishing that the value of the job work done by the job workers should be considered as if the processed fabric was sold by the assessee, thus constituting a purchase.

4. By applying the principles from the Constitution Bench Judgment, the Court concluded that the assessees had indeed purchased the processed fabric from the job workers, meeting the condition of "subsequent purchase" as required by the Notification. This interpretation was crucial in determining the eligibility of the assessees for the exemption.

5. Furthermore, the Court considered Circular No. 737/53/2003-CX dated 19.08.2003, which clarified that activities undertaken on duty-paid goods, such as labeling, repacking, and other processes, were fully exempt from excise duty under Notification No. 38/2003. The Circular supported the Tribunal's decision to grant the exemption to the assessees based on the processes they had undertaken.

In conclusion, the Supreme Court dismissed the appeals filed by the Department, affirming the Tribunal's decision to extend the benefit of the exemption notification to the respondents-assessees based on a comprehensive analysis of the legal provisions, judgments, and circulars involved in the case.

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