2004 (11) TMI 170 - AT - Central Excise

Benefit of exemption under Notification No. 15/2000-C.E. - knitted garments - duty - Penalty - HELD THAT - In the present matter it has not been disputed by the Appellants that the appropriate duty has not been paid on the knitted textile fabrics. In view of this the first part of the condition No. 4 of Notification No. 15/2002 has apparently been not complied with by the Appellants. Explanation to Notification No. 15/2002-C.E. only mentions that textile fabrics shall be deemed to have been duty paid even without production of documents evidencing payment of duty thereon. The Explanation thus only takes away the requirement of producing the evidence of duty payment in respect of textile fabrics. It does not anywhere mentions that the appropriate duty of excise leviable on textile fabrics need not be paid or that the textile fabrics shall be deemed to have been duty paid even if it was exempted from payment of duty or it has not suffered any payment of excise duty. The learned SDR has rightly emphasized that the basic condition of payment of appropriate duty has not been done away with. We also agree with the learned SDR that the subsequent amendment in Notification No. 15/2002 by Notification No. 3/2003-CE, dated 6-1-2003 is not applicable retrospectively as the same is not clarificatory in nature. We, however, agree with the learned Advocate that no penalty is imposable in the present matter as the issue relates to interpretation of exemption Notification. Accordingly we uphold the demand of Central Excise duty but set aside the penalties imposed on both the Appellants. Thus the appeal filed by the company is partly allowed and the appeal filed by the Appellant No. 2 is allowed.

Summary

Issues involved:
The issue involves whether the benefit of exemption under Notification No. 15/2000-C.E., dated 1-3-2000 (Srl. No. 14) is available to the knitted garments manufactured by M/s. Sports & Leisure Apparel Ltd. and their Company Secretary.

Summary:

Issue 1 - Interpretation of Exemption Notification:
The Appellants contended that they have satisfied all conditions of Notification No. 15/2000-C.E., emphasizing that knitted garments are exempt if manufactured from duty paid yarn and fibers without availing Cenvat credit. They argued that the knitted fabrics should be deemed duty paid under Explanation 2, even if exempt under another notification. However, the Revenue argued that the appropriate duty must be paid on fabrics for the exemption to apply, citing the Supreme Court's interpretation emphasizing actual payment of excise duty on raw materials.

Judgment:
The Tribunal noted that the Appellants did not dispute that the appropriate duty was not paid on knitted fabrics, thus not complying with the first condition of the Notification. The Explanation only removes the need for producing duty payment documents, not the requirement of paying the appropriate excise duty. The subsequent amendment was deemed not retrospective, and while penalties were set aside due to the interpretative nature of the issue, the demand for Central Excise duty was upheld. The appeal by the company was partly allowed, and the appeal by the Company Secretary was allowed.

This summary provides a detailed breakdown of the arguments presented by both sides and the Tribunal's analysis leading to the judgment.