2021 (10) TMI 639 - AT - Central Excise

Maintainability of appeal - being two units of the appellants involved in this case whether only one appeal is sufficient or one more appeal is required to be filed? - interpretation of various notifications and availability of exemption - HELD THAT - This issue was not disputed by the revenue in earlier two round of appeals which attained finality therefore at this stage the objection of the revenue is not tenable. Moreover even though there are two units i.e. Twisting unit and other is Dyeing unit but both the units belongs to one company hence only one consolidated appeal is sufficient particularly when Order-In-Original is one common order in respect of both the units. Hence the revenue s objection on this point is not sustained. Exemption under N/N. 5/1998-CE N/N. 5/1999-CE N/N. 6/2000-CE N/N. 3/2001-CE N/N. 6/2002-CE - twisted yarn - dyed yarn - fulfilment of conditions of manufacture of exempted goods from the duty paid inputs or not - inputs procured from open market on commercial invoices can be treated as duty paid goods or otherwise - Whether the condition of use of duty paid goods stands satisfied in a case where the duty was paid on the textured or draw twisted yarn by the appellant which was then utilized in the twisted yarn and on the said twisted yarn the exemption was availed? - HELD THAT - In the present case the duty demand is on twisted yarn and dyed yarn. The twisted yarn was manufactured out of partially oriented yarn/non-texturized yarn purchased and textured by the appellant and on which textured yarn appellant paid duty and the texturized yarn or draw-twisted yarn which was purchased from the manufacturers under the Central Excise Invoices or from the open market from various dealers under Commercial invoices. Twisted yarn manufactured out of the Yarn textured by the appellant - HELD THAT - When the yarn is purchased from the open market it is deemed to be duty paid and the appellant does not have to show the purchase on payment of duty. The adjudicating authority simply relied upon the statements of the appellant s representative that the base yarn was purchased from local merchants from open market without duty paid invoice. Only on the basis of these statements it cannot be established that the base yarn procured from the open market shall be treated as non duty paid. Dyed yarn - HELD THAT - The same was manufactured partly from twisted yarn received from the appellant s twisting unit which was made out of duty paid textured or draw twisted yarn and the textured or draw twisted yarn purchased from the open market. In this case since right from the processing of textured or draw twisted yarn up to the manufacture of dyed yarn the activities were carried out by the appellants themselves. Since the initial raw material i.e. Textured or draw Twisted yarn on which excise duty was paid the condition of the exemption provided to dyed yarn that the same should be manufactured out of duty paid goods stands satisfied - When the dyed yarn is made out of twisted yarn and the twisted yarn in turn is made out of duty paid or draw twisted yarn the dyed yarn is also to be considered as having been manufactured out of duty paid textured or drawn twisted yarn therefore they are eligible for the benefit of the said notifications - the dyed yarn made out of the yarn purchased from the open market is entitle to the exemption. Time Limitation - HELD THAT - In the present case the issue involved is of interpretation of notification. On the same issue there were number of judgments including the judgment of Supreme Court in favour of the assessee therefore the appellant had entertained bona fide belief that they are entitle for the exemptions notifications therefore it cannot be said that there is any fraud collusion wilful misstatement or suppression of facts or contravention with intention to evade duty on the part of the appellant - demand for the longer period is not sustainable. The impugned order is not sustainable on merit as well as on limitation - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Entitlement to exemption notifications for twisted yarn and dyed yarn.
2. Fulfillment of conditions for manufacture of exempted goods from duty-paid inputs.
3. Treatment of inputs procured from the open market on commercial invoices as duty-paid goods.
4. Satisfaction of the condition of using duty-paid goods when duty was paid on textured or draw twisted yarn used in twisted yarn.

Detailed Analysis:

Twisted Yarn:
1. Manufacture and Duty Payment: The twisted yarn was manufactured from partially oriented yarn/non-texturized yarn (on which duty was paid by the appellant) and textured or draw-twisted yarn purchased from manufacturers under Central Excise invoices or from the open market. The appellant claimed exemption on twisted yarn under various notifications.

2. Contention of the Department: The department argued that there was no evidence of duty payment on yarn purchased from the open market, thus the twisted yarn made from such yarn could not be considered duty-paid, leading to a duty demand.

3. Legal Precedents and Tribunal’s View: The tribunal noted that goods purchased from the open market are deemed duty-paid unless proven otherwise by the department. This was supported by several judgments (e.g., CCE v Decent Dyeing Co, Nagpur Re-Rolling Mills v CCE, Usha Udyog v CCE). The department failed to establish that the yarn was non-duty paid. Therefore, the exemption on twisted yarn was correctly availed by the appellant.

Dyed Yarn:
1. Manufacture and Duty Payment: The dyed yarn was manufactured from twisted yarn received from the appellant’s twisting unit (made from duty-paid textured or draw-twisted yarn) and textured or draw-twisted yarn purchased from the open market.

2. Contention of the Department: The department contended that since no duty was paid on twisted yarn by the twisting unit, the dyed yarn made from such non-duty paid twisted yarn was not eligible for exemption.

3. Legal Precedents and Tribunal’s View: The tribunal held that dyed yarn made from twisted yarn, which in turn was made from duty-paid textured or draw-twisted yarn, should be considered as made from duty-paid yarn. This was supported by judgments such as Kejriwal Yarns P. Ltd v CCE, Precot Mills Ltd v CCE, and CCE v Atul Drug House. The department could not prove that the yarn purchased from the open market was non-duty paid. Thus, the dyed yarn was eligible for exemption.

Limitation:
1. Extended Period of Limitation: The Show Cause Notice invoked the extended period of limitation for demanding duty from June 1998 to February 2003. The appellant argued that there was no fraud, willful misstatement, or suppression of facts, and they had a bona fide belief based on legal precedents that the yarn purchased from the open market was deemed duty-paid.

2. Tribunal’s View: The tribunal noted that the issue involved interpretation of notifications and there were several judgments in favor of the assessee. Therefore, the appellant’s belief was bona fide, and invoking the extended period of limitation was not justified. The tribunal also referred to its previous order in the identical case of Kiran Industries, where the larger period of limitation was not applied.

Conclusion:
The tribunal concluded that the appellant was entitled to the exemption notifications for both twisted yarn and dyed yarn. The inputs procured from the open market were deemed duty-paid, and the conditions for using duty-paid goods were satisfied. The demand for the extended period was not sustainable. The impugned order was set aside, and the appeals were allowed with consequential reliefs.