2016 (12) TMI 273 - AT - Central Excise

Benefit of N/N. 14/2002-CE dated 01.03.2002 - concessional rate of duty - 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:
1. Denial of benefit of Notification No. 14/2002-CE dated 01.03.2002 to the appellant manufacturing Man made Processed Knitted Fabrics.
2. Interpretation of the condition of the notification regarding payment of duty on Textile Fabrics.
3. Legal fiction created by Explanation II of the exemption notifications.
4. Applicability of the benefit of the notification based on the decision of the Hon'ble Apex Court.

Detailed Analysis:
1. The appellant appealed against the denial of the benefit of Notification No. 14/2002-CE dated 01.03.2002, which allowed concessional duty rates for manufacturing Man made Processed Knitted Fabrics under certain conditions. The denial was based on the assumption that since the Textile Fabrics used were exempt from duty, no duty was deemed to have been paid, thus disqualifying the appellant from the notification's benefits.

2. The appellant argued that as no duty was payable on Textile Fabrics, it should be considered as duty paid. The Tribunal noted that the exemption was denied due to the requirement of producing documents evidencing duty payment. However, a legal fiction was created by the explanation to the exemption notifications, deeming Textile Fabrics to have been duty paid even without documentary proof, as clarified by the Hon'ble Apex Court in a previous case.

3. The Hon'ble Apex Court clarified that manufacturers not opting for the Modvat facility could clear goods without paying excise duty, as reflected in the Budgetary Notes. Explanation II of the notifications created a legal fiction that duty was deemed paid without documentary evidence. The court emphasized that such legal fictions must be given their intended effect, leading to the conclusion that no duty was required to be paid on Textile Fabrics for availing the benefits of the notifications.

4. Considering the decision of the Hon'ble Apex Court and the legal fiction created by Explanation II, the Tribunal held that the appellant was not obligated 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 clarified the interpretation of the notification's conditions, the legal fiction regarding duty payment on Textile Fabrics, and the applicability of the benefits based on the decision of the Hon'ble Apex Court, ultimately ruling in favor of the appellant.