2023 (10) TMI 1299 - AT - Central Excise

Captive Consumption - Benefit of exemption - Time Limitation - requirement to pay Central Excise duty on intermediate goods, i.e. dyed yarn - manufacture for captive consumption or not - benefit of Notification No. 67/95-CE dated 16.03.1995 denied - HELD THAT - There is no dispute with regard to the fact that entire finished products were exported under bond/LUT and there was no domestic sale by the appellant. The appellant has exported their final product without payment of duty under letter of undertaking and bond executed by them and accepted by the jurisdictional Assistant Commissioner of Customs, New Delhi and the show cause notice dated 05.08.2004 issued by Commissioner of Customs (Preventive) New Delhi was withdrawn in the light of CBEC s circular No. 19/05-Cus dated 21.03.2005. Since the appellant has got their goods manufactured/yarn dyed from job worker; in these circumstances, the job worker is the manufacturer of dyed yarn and if any duty is to be paid it is to be paid by the job worker. The dyed yarn by the job worker is not captively manufactured by the appellant and in that circumstance, the Notification No. 67/95-CE have no relevance to the facts of the present case - the original authority has held that since the finish goods manufactured by the appellant are chargeable to nil rate of duty under heading 5702.09 the benefit of Notification No. 67/95-CE is not available in view of the proviso to the said notification. But in the present case entire quantity of goods manufactured was exported and these clearances cannot be considered as clearance for home consumption. The appellants are entitled to the benefit of exemption Notification No. 67/95-CE. Further, when the appellants are entitled to exemption, the imposition of penalty on the director is bad in law. The impugned order is set aside - Appeal allowed.

Summary

Issues involved:
The issues involved in this case are the demand of duty, imposition of penalty under Central Excise Act, and the eligibility for benefit of Notification No. 67/95-CE.

Demand of Duty and Penalty Imposition:
The case revolved around the demand of duty amounting to Rs. 1,59,75,117/- and the penalty imposed under Section 11AC of Central Excise Act, along with an additional penalty on the Director under Rule 26 of the Central Excise Rules, 2002. The dispute arose from the appellant's purchase of grey yarn for dyeing, with Revenue contending that the dyed yarn attracted Central Excise duty due to dyeing being considered as manufacturing. The show cause notice alleged non-payment of duty on dyed yarn sent to job workers, leading to the demand and penalties. The appellant argued that they had disclosed information to the department, including job worker intimation, and that the demand was time-barred. The Tribunal considered the previous round of litigation, where the matter was remanded for fresh consideration, and ultimately held that the demand was barred by limitation and set aside the impugned order.

Eligibility for Benefit of Notification No. 67/95-CE:
The appellant contended that they were entitled to the benefit of Notification No. 67/95-CE, which exempted or charged nil rate of duty on goods cleared for export. They argued that since the final products were exported without payment of duty, the restriction under the notification did not apply. The Tribunal found that the appellants were indeed entitled to the exemption under the notification, as the goods were exported and not cleared for home consumption. Consequently, the imposition of penalty on the director was deemed unlawful.

Conclusion:
In conclusion, the Tribunal set aside the impugned order, allowing both appeals of the appellants. The decision was based on the finding that the demand of duty was time-barred and that the appellants were eligible for the benefit of the exemption under Notification No. 67/95-CE due to the export of the final products. The penalty imposed on the director was held to be unjustified in light of the appellant's entitlement to the exemption.