2009 (6) TMI 5 - HC - Central Excise

Exemption under notification no. 30/2004 staple fibres under heading 55.06 HC hold that the term staple fibres at Sr. No.10 of Notification No. 30/04 applies to duty paid inputs falling under Heading 55.01 to 55.04 of the CET which are used in the manufacture of Tops (55.06 / 55.07) and the said term is not restricted to the inputs falling under Heading 55.03 / 55.04 only. Accordingly, we hold that in the present case, excise duty on Tops (55.06) manufactured from 16% duty paid Tow (55.01) would be exempt under Notification No.30/04 issued in accordance with the new tax regime introduced on 8-7-2004.

Issues Involved:
1. Entitlement to Exemption under Notification No. 30/2004
2. Interpretation of the Term 'Staple Fibres' in Notification No. 30/2004
3. Conformity of Notification No. 30/2004 with the New Tax Regime
4. Conditions for Availing Exemption under Notification No. 30/2004
5. Applicability of the Finance Minister's Speech in Interpreting the Notification

Detailed Analysis:

1. Entitlement to Exemption under Notification No. 30/2004
The primary issue was whether a manufacturer using duty-paid inputs classified under Heading 55.01 is entitled to the exemption provided under Notification No. 30/2004. The petitioners argued that the exemption should apply to inputs falling under both Heading 55.01 and 55.03, while the revenue contended that it only applied to inputs under Heading 55.03.

2. Interpretation of the Term 'Staple Fibres' in Notification No. 30/2004
The court examined the term 'staple fibres' as used in the notification. The petitioners contended that the term should be interpreted broadly to include inputs under Heading 55.01. The court concluded that the term 'staple fibres' in the notification refers to inputs falling under Headings 55.01 to 55.04, aligning with the broader classification of man-made staple fibres in Chapter 55 of the CET.

3. Conformity of Notification No. 30/2004 with the New Tax Regime
The court considered whether the notification was in line with the new tax regime announced on 8/7/2004, which aimed to simplify the tax structure by imposing mandatory excise duty at specific stages. The court found that the notification was issued to implement this new regime, which intended to avoid the cascading effect of multiple taxations.

4. Conditions for Availing Exemption under Notification No. 30/2004
The notification required that the inputs be procured from outside and that the manufacturer should not have the facility to produce goods under Headings 55.01 to 55.04. The court noted that the petitioners met these conditions, as they used duty-paid inputs from Heading 55.01 and did not have the facility to produce such inputs themselves.

5. Applicability of the Finance Minister's Speech in Interpreting the Notification
The court acknowledged the relevance of the Finance Minister's speech in understanding the legislative intent behind the new tax regime. The speech indicated a move towards a simplified tax structure, which supported the petitioners' interpretation of the notification.

Conclusion:
The court held that the term 'staple fibres' in Notification No. 30/2004 applies to duty-paid inputs falling under Headings 55.01 to 55.04, not just Heading 55.03. Consequently, the petitioners were entitled to the exemption for tops manufactured from duty-paid inputs under Heading 55.01. The writ petition was allowed, and the rule was made absolute with no order as to costs.

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