2018 (6) TMI 915 - AT - Central Excise

Benefit of N/N. 14/2002-CE - processed fabrics - procurement of raw material from the unit availing SSI Exemption - the raw material procured by appellants is admittedly exempted under SSI Exemption under N/N. 8/2001-CE and 8/2002- CE, whereby it attracts nil rate of duty, whether the final product manufactured by the appellant i.e. processed fabrics is eligible for exemption under N/N. 14/2002-CE? - extended period of limitation. Held that - The condition no.5 of N/N. 14/2002- CE that the excisable goods as specified in the notification are exempted if made from textile fabrics on which the appropriate duty of excise leviable read with any notification has been paid - In the present case it is an admitted fact that the supplier of the raw material has manufactured and cleared the grey fabrics to the appellant without payment of central excise duty availing SSI exemption under N/N. 8/2001-CE & 8/2002-CE. - The Circular No.667/58/2002-CXdated 26.09.2002 clarified that when an exemption is extended subject to the condition that the appropriate duty has been paid on the raw material, then such exemption shall not be available when raw material is not liable to excise duty or such duty is nil. The raw material / grey fabrics are clearly known as non duty paid as the same has been cleared by manufacturer after availing SSI exemption. The clearance documents clearly show that no duty has been paid on grey fabrics. In such situation the Explanation II is not applicable. If Explanation II is applied in such situations, then the condition no. 5 will be redundant. Extended period of limitation - penalty - Held that - The appellant was bound to follow the new circular immediately and in case of any doubt they could have approached the department. In absence of the same the allegation of suppression of facts sustain and penalty imposable. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Entitlement for exemption under Notification No. 14/2002-CE for processed woven fabrics.
2. Whether the demand is hit by limitation.

Analysis:

Entitlement for Exemption:
The appellant claimed exemption under Notification No. 14/2002-CE for processed woven fabrics by complying with condition No. 5 of the notification. The appellant argued that the raw material procured, i.e., gray fabrics, was duty paid as the supplier cleared the goods under SSI exemption. The appellant relied on Explanation-II of the Notification, which treats raw material as duty paid even without documentary evidence. The appellant contended that since the gray fabrics were manufactured by the supplier out of duty paid yarn, they should be considered duty paid. However, the revenue argued that the raw material was recognized as non-duty paid based on documents, thus contravening the notification.

Limitation Issue:
Regarding the limitation, the period involved was from September 2002 to December 2002, with the show-cause notice (SCN) issued on 09.03.2005 invoking the extended period of limitation. The appellant argued that there was no suppression of facts as the department was aware of the goods being cleared on a job-work basis and paying excise duty. The appellant also cited judgments to support their claim that there was confusion regarding the availability of exemption during the relevant period, thus no willful misstatement or suppression existed to invoke the extended period of limitation.

Decision:
After considering the submissions, the Tribunal observed that the processed fabrics were not eligible for exemption under Notification No. 14/2002-CE as the raw material supplier had cleared gray fabrics without paying excise duty under SSI exemption. The Tribunal highlighted that the Circular clarified that exemption is not available when the raw material is not liable to excise duty or when such duty is nil. The Tribunal found that the appellant's reliance on case laws was not applicable to the present case due to the undisputed facts. Additionally, the Tribunal noted that the appellant failed to follow the modified circular, leading to a sustained allegation of suppression of facts and imposable penalty. Consequently, the impugned order was upheld, and the appeal was dismissed.