2016 (11) TMI 1163 - AT - Central Excise

Benefit of N/N. 14/2002-CE dated 01.03.2002 - Man made Processed Knitted Fabrics classifiable under Tariff sub Heading No. 6002.93 of Central Excise Tariff Act, 1985 - Held that - in this case benefit of exemption Notification have been denied on the premises that as per Notification No. 14/2002-CE, the exemption is available on production of documents evidencing payment of duty thereon, but as per explanation to the exemption notifications creates a legal fiction, specifying that for the purpose of conditions of this notification, textile yarn or fabrics shall be deemed to have been duty paid even in the absence of production of documents evidencing payment of duty thereon, as no duty is payable on Textile Fabric. Therefore, the appellant is not required to produce duty paying documents - reliance placed on the decision of the case of M/s Sports & Leisure Apparel Ltd. 2016 (8) TMI 128 - SUPREME COURT where it was held that when Explanation II states that the duty shall be deemed to have been paid even without production of documents evidencing payment of duty thereon, it was clearly meant that no duty was required to be paid by the manufacturers of knitted garments. Such an intention is clearly reflected in the Government s own Budgetary Notes extracted above. We, thus, hold that Explanation II to the said exemption Notification Nos. 14/2002 and 15/2002 create legal fiction and that was the precise purpose for which this explanation was added. It is trite law that a fiction created by a provision of law is to be given its due play and it must be taken to its logical conclusion. The appellant is not required to produce the evidence payment of duty on Textile Fabrication and benefit of Notification No. 14/2002-CE is available to the appellants. - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against denial of benefit under Notification No. 14/2002-CE dated 01.03.2002.

Detailed Analysis:
1. Issue of Denial of Benefit: The appellant appealed against an order denying the benefit of Notification No. 14/2002-CE, which prescribed concessional duty rates for manufactured goods subject to specific conditions. The denial was based on the presumption that no duty was paid on Textile Fabrics used in manufacturing, thus rendering the appellant ineligible for the notification's benefit.

2. Contention of Appellant: The appellant argued that since no duty was payable on Textile Fabrics, it should be considered as duty paid by default, entitling them to the benefit of the notification. The appellant relied on precedents such as Arvind Products Ltd. and M/s Sports & Leisure Apparel Ltd. to support this claim.

3. Legal Fiction and Exemption Notification: The Tribunal observed that the exemption notification required production of duty payment documents. However, an explanation within the notification created a legal fiction stating that Textile Fabrics shall be deemed duty paid, even without documentary evidence, as no duty was payable on them. This interpretation relieved the appellant from the obligation to produce duty payment documents.

4. Precedent and Apex Court Decision: The issue was also addressed in a case before the Hon'ble Apex Court involving Sports & Leisure Apparel Ltd. The Court clarified that manufacturers opting not to avail Modvat facility were allowed to clear goods without paying excise duty. The Court emphasized that the legal fiction created by the notification should be given due weight, and the duty was deemed paid without documentary proof.

5. Final Decision: Considering the Apex Court's ruling and the legal fiction created by the notification, the Tribunal concluded that the appellant was not required to provide evidence of duty payment on Textile Fabrics. Consequently, the benefit of Notification No. 14/2002-CE was deemed available to the appellant, leading to the setting aside of the impugned order and allowing the appeal with any consequential relief.

In conclusion, the judgment resolved the issue of denial of benefit under the notification by interpreting the legal fiction created within the exemption notification and aligning with the Apex Court's decision on a similar matter, ultimately granting the appellant the benefit sought.