2023 (9) TMI 403 - AT - Central Excise

Recovery of Excise duty alongwith interest - imposition of penalty of ₹. 5000 under rule 27 of Central Excise Rules, 2002 - clearance of dyed yarn without complying with condition in N/N. 6/2002-CE dated 1st March 2002 - HELD THAT - The principle enshrined within the scheme of central excise, intended to tax all including intermediate goods manufacture but for convenience is excluded from levy at each of the stages subject to duty being paid at some stage by the manufacturer and subject to procedure as spelt out in rule 16A, rule 16B and rule 16C of Central Excise Act, 1944. In such circumstances, a separate notification by the Central Government, in concord with tax policy formulation, must be presumed to have a separate intent so as not to be superfluous. Hence, subject to condition that yarn emerging therefrom is exempted from duty, it is only required that the finished goods should have been manufactured either out of duty paid textured yarn or twisted yarn and that CENVAT Credit on such inputs had not been availed. It is not the case of Revenue that credit had been availed. In identical circumstances, it has been held by the Tribunal in re Shreekar Polyester Pvt Ltd 2017 (1) TMI 25 - CESTAT MUMBAI that there is no condition that if doubled yarn is subject to the process of dyeing, the dyed yarn is entitled for exemption only if at the doubling stage duty had been discharged. Moreover, the appellants contended that even if the duty is paid at the doubling stage, Cenvat credit can be availed for clearance of dyed yarn and in effect there would be revenue neutrality. In these circumstances, the appellant s interpretation of condition 19(ii) appears to be correct. Thus, nothing further remains to be decided in the dispute - the appeal allowed by setting aside the impugned order.

Summary

Issues Involved:

1. Applicability of Notification No. 6/2002-CE dated 1st March 2002.
2. Compliance with conditions of the notification.
3. Demand of duty and imposition of penalty.
4. Limitation period for raising demand.

Summary:

1. Applicability of Notification No. 6/2002-CE dated 1st March 2002:
M/s Shree Rishabh Polyester challenged the recovery order of Rs. 1,41,391 under section 11A of the Central Excise Act, 1944, along with interest under section 11AB, and a penalty of Rs. 5000 under rule 27 of the Central Excise Rules, 2002. The dispute arose due to the claimed benefit of Notification No. 6/2002-CE, which restricted liability to Rs. 9 per kg as CENVAT and additional excise duty to 15% on dyed yarn, instead of higher rates for other duties.

2. Compliance with Conditions of the Notification:
The appellant argued that the circumstances of their case were identical to those in the case of M/s Shreekar Polyester Pvt Ltd, where the Tribunal had previously ruled in favor of the appellant. The notification required the finished goods to be manufactured from duty-paid textured or draw-twisted yarn without availing CENVAT credit in the dyeing process. The appellant contended that they complied with these conditions as the dyed yarn was manufactured from duty-paid textured yarn, despite the intermediate stage of twisted yarn.

3. Demand of Duty and Imposition of Penalty:
The Revenue argued that the finished goods were not manufactured from duty-paid textured yarn but from twisted yarn, which did not comply with the notification's conditions. However, the Tribunal found that the principle within the central excise scheme intended to tax all manufacture stages but allowed for exclusions if duty was paid at some stage. The Tribunal concluded that the finished goods were manufactured from duty-paid textured yarn and that the intermediate twisted yarn did not alter the duty-paid status of the principal yarn.

4. Limitation Period for Raising Demand:
The Tribunal also noted that the demand was barred by limitation, as it was raised beyond the normal period of one year. The appellant had made declarations to the department and recorded entries in statutory records, which did not constitute suppression or misstatement with intent to evade duty. Therefore, the longer period of limitation could not be invoked.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order, and ruled that the conditions of the notification were met, the demand was barred by limitation, and there was no suppression or misstatement by the appellant. The appeal was allowed with consequential relief to the appellants. The order was pronounced in the open court on 05/09/2023.