2017 (6) TMI 851 - AT - Central Excise

Benefit of N/N. 14/2002- CE dated 01.03.2002 - denial on the ground that documents evidencing payment of duty were not produced - Held that - 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 - benefit of N/N. 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.

Analysis:
The appellant manufactured Man made Processed Knitted Fabrics under Tariff sub Heading No.6002.93 and paid concessional duty under Notification No.14/2002-CE. However, the benefit was denied as the Textile Fabrics used were duty exempt. The appellant argued that duty on Textile Fabrics should be deemed paid, citing relevant tribunal and court decisions. The Tribunal noted that the exemption was denied due to lack of duty payment evidence, but Explanation II of the notification deems duty paid on Textile Fabrics without proof. The Supreme Court's decision in a similar case supported this interpretation, emphasizing that no duty was required for manufacturers opting out of MODVAT credit. Therefore, the Tribunal ruled in favor of the appellant, holding that the benefit of the notification applies without requiring duty payment evidence for Textile Fabrics.

This judgment clarifies the application of Notification No.14/2002-CE regarding duty payment on Textile Fabrics for concessional duty rates on manufactured goods. It highlights the legal fiction created by Explanation II, deeming duty paid on Textile Fabrics even without documentary proof. The decision aligns with the Supreme Court's interpretation that manufacturers opting out of MODVAT credit are not obligated to pay duty on Textile Fabrics. By setting aside the impugned order and allowing the appeal, the Tribunal upholds the appellant's entitlement to the benefit of the notification based on the legal fiction of duty payment on Textile Fabrics.

This case underscores the significance of legal fictions in interpreting exemption notifications and duty payment requirements for manufactured goods. The Tribunal's reliance on precedent and the Supreme Court's ruling establishes a clear precedent for cases involving duty exemptions and concessional rates under specific notifications. The judgment emphasizes the legislative intent behind Explanation II and the practical implications for manufacturers availing concessional duty rates without the need for documentary proof of duty payment on certain inputs. Overall, the decision provides clarity on the application of legal fictions in excise duty matters and upholds the appellant's right to the benefit of Notification No.14/2002-CE based on the specific conditions outlined in the notification and relevant judicial interpretations.