1996 (2) TMI 150 - HC - Central Excise

Issues Involved:
1. Interpretation of Notification No. 211 of 1982 regarding excise duty on base fabrics and embroidery.
2. Applicability of Rule 96DD for removal of cotton fabrics for embroidery without payment of duty.
3. Requirement to pay excise duty on base fabrics for goods exported under bond.
4. Validity of the orders demanding excise duty on base fabrics before removal for embroidery.
5. Relevance of rebate claims exceeding excise duty paid.

Issue-wise Detailed Analysis:

1. Interpretation of Notification No. 211 of 1982:
The main question revolves around the interpretation of Notification No. 211 of 1982, which sets the excise duty rate for embroidery machines. The notification specifies that the rate of duty per meter length of the machine per shift is in addition to the duty leviable on the base fabrics used for embroidery. However, it does not state that excise duty on base fabrics must be paid at the time of removal for embroidery or simultaneously with the duty on embroidery.

2. Applicability of Rule 96DD:
Rule 96DD allows the removal of cotton fabrics from one factory to another for embroidery without payment of duty, provided the prescribed procedure is followed. Sub-rule (3) clarifies that if the embroidered fabrics are cleared for home consumption, the duty is payable at the time of such clearance. The rule does not require payment of duty on base fabrics at the time of removal for embroidery.

3. Requirement to Pay Excise Duty on Base Fabrics for Exported Goods:
Rule 13 permits the export of goods without payment of duty from a licensed factory, provided the export is made according to the specified procedure and a bond is executed. The petitioners exported embroidered cotton fabrics under bond, thus exempting them from paying excise duty on the base fabrics. The purpose of Rule 13 is to grant exemption from duty for exported goods, and it is not subject to Rule 96DD or Rule 96ZI.

4. Validity of Orders Demanding Excise Duty on Base Fabrics:
The orders dated 8th June 1987, 9th October 1987, and 19th October 1987, which demanded excise duty on base fabrics before removal for embroidery, were found to be against the statutory rules. The orders misinterpreted Proviso (1) to Notification No. 211/82, which does not mandate such payment. The subsequent Trade Notices clarified that base fabrics duty should be collected only after embroidery and at the time of clearance for home consumption or export.

5. Relevance of Rebate Claims Exceeding Excise Duty Paid:
The contention that the petitioners received more rebate than the excise duty paid was deemed irrelevant. The rebate is claimed on embroidered fabrics, not on base fabrics, and is governed by Rule 12 and Notification No. 162/69. The rebate rates are fixed per square meter and are not linked to the excise duty paid.

Conclusion:
The court concluded that the impugned orders were unjustified and against statutory rules. The orders demanding excise duty on base fabrics at the time of removal for embroidery were quashed. The respondents were restrained from taking further action based on the impugned show cause notices, which were also quashed. The petition was allowed, and the rule was made absolute with no order as to costs. The issuance of a certified copy of the judgment was expedited.

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