2008 (3) TMI 54 - AT - Central Excise

Not 202/88 provide exemption to specified goods falling u/ch 72 & 73, if the same are manufactured out of specified inputs on which duty of excise has already been paid - respondent s raw material was obtained by breaking up of ships & were cleared by manufacturer under exemption, without payment of duty, so revenue contend that benefit of Not 202/88 wasn t available held that nil rate of duty can t be considered as duty paid - exemption will not be available if inputs are subject to nil rate

Summary

Issues:
Interpretation of exemption Notification No. 202/88-C.E. dated 20-5-88, as amended, regarding duty exemption on specified goods manufactured from specified inputs. Whether the benefit of the notification is available to a manufacturer using raw materials obtained from ship breaking and cleared under exemption without payment of duty.

Analysis:
The case involved a dispute regarding the interpretation of Notification No. 202/88-C.E. dated 20-5-88, which provided duty exemption to specified goods manufactured from specified inputs falling under Chapters 72 & 73 of the Central Excise Tariff Act. The respondents, engaged in manufacturing C.T.D. Bars, faced proceedings for recovery of duty amounting to Rs. 6,16,855 due to the revenue's view that the benefit of the exemption was not applicable as the raw material was obtained from ship breaking and cleared under exemption without duty payment. The original adjudicating authority confirmed the duty demand, but the Commissioner (Appeals) set aside the order, leading to the appeal before the tribunal.

The Commissioner (Appeals) noted that the amendment to the notification on 25-7-91 omitted the phrase "or charged to NIL rate of duty," indicating the government's policy to consider nil rate of duty distinct from non-duty paid stocks of inputs. Referring to previous Supreme Court decisions, the Commissioner highlighted the legal fiction created by the exemption notification, deeming all stocks of inputs as duty paid except those clearly recognizable as non-duty paid. The Commissioner emphasized that the notification's explanation must be interpreted to uphold its purpose, distinguishing it from other notifications.

The revenue relied on Supreme Court judgments in cases like Dhiren Chemical Industries and Kalyani Packing Industries. The tribunal reviewed these decisions, particularly clarifications provided in the Kalyani Packing Industries case, emphasizing the binding nature of the Supreme Court's interpretations. The tribunal concluded that nil rate of duty cannot be considered as duty paid, aligning with the Supreme Court's stance. Considering the explanation attached to the notification and the fact that the raw material was cleared at nil rate of duty, the tribunal held that the benefit of the notification was not available to the assessee. Additionally, the tribunal referenced a Board's Circular issued post the Dhiren Chemical Industries case, clarifying that exemption conditions requiring excise duty payment on inputs would not apply if the inputs were subject to nil rate of duty.

Ultimately, the tribunal set aside the Commissioner (Appeals)'s order and allowed the appeal filed by the revenue, emphasizing the application of the Supreme Court's interpretations in determining the availability of duty exemption under the notification.