2018 (7) TMI 1682 - AT - Central Excise

100% EOU - rags cleared to DTA by availing exemption N/N. 23/2003-CE dated 31.03.2003 - whether the rags are eligible to the benefit of exemption N/N. 23/2003-CE dated 31.03.2003? Held that - by switching over from 6 digit to 8 digit tariff, no new commodity has been introduced under the 8 digit only existing commodities were classified in a proper manner and mentioned in the 8 digit tariff. Rags was not a new commodity since from time to time various exemption notifications were issued recognizing rag as an excisable commodity - In the judgement of the Bombay High Court in the case of Punjab Business and Supply Co. Pvt Ltd s case, 1977 (3) TMI 43 - HIGH COURT OF BOMBAY , rag has been considered as a commodity following under the first schedule to the Central Excise Act, 1944. Rag is an excisable goods, accordingly, eligible to the benefit of the notification - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the appellant is liable to pay differential customs duty cess and handloom cess for the period from October 2004 to November 2005.
- Whether rags are eligible for the benefit of exemption Notification No. 23/2003-CE dated 31.03.2003 for the period October 2004 to February 2005.

Analysis:
1. Issue 1 - Liability for Differential Duty:
The appeal was filed against an order passed by the Commissioner of Central Excise & Customs, Vadodara. The appellant, a 100% EOU engaged in manufacturing various products, imported mixed woollens/synthetic rags and cleared them to DTA. The Commissioner alleged that the goods were not excisable as the process did not amount to manufacture. The Tribunal remanded the matter for re-examination. The Ld. Commissioner confirmed the demand of differential customs duty cess and handloom cess for the period from October 2004 to November 2005. The appellant challenged this decision, arguing that rags were excisable goods, citing various exemption notifications and legal precedents. The Ld. AR for the Revenue supported the Commissioner's findings, referring to relevant legal judgments.

2. Issue 2 - Eligibility for Exemption Notification:
The key question was whether rags were eligible for the benefit of exemption Notification No. 23/2003-CE dated 31.03.2003 for the period October 2004 to February 2005. The Ld. Commissioner held that since rags were not specifically mentioned in the First Schedule to Central Excise Tariff Act, 1985 before 01st March 2005, they could not be considered excisable goods and thus not eligible for the exemption. The appellant argued that despite not being explicitly mentioned, rags were considered excisable goods by the department, supported by past notifications and legal judgments. The Tribunal found merit in the appellant's contentions, emphasizing that rags were not a new commodity and had been recognized as excisable goods through various notifications. Drawing parallels with a similar case regarding fresh mushrooms, the Tribunal concluded that by transitioning from 6 digit to 8 digit tariff, no new commodities were introduced, and rags satisfied the criteria to be considered excisable goods, thus eligible for the exemption.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, emphasizing that rags were excisable goods and eligible for the benefit of the exemption notification.