2009 (5) TMI 193 - AT - Central Excise

Fabrics - In this case there is no dispute about the availability of the concessional rate of duty under Notification No. 14/02-CX. (Sl. No. 16) to the processed knitted fabrics made in the appellant s factory from yarn stage in a continuous process. The dispute is only in respect of the quantity of the processed, knitted fabrics which were manufactured out of, grey/unprocessed fabric purchased from the market, which according to the Revenue cannot be treated as duty paid fabrics, - in view of the provisions of Explanation II to Notification No. 14/02-C.E., only the unprocessed fabric is to be treated as duty paid - exemption to unprocessed knitted fabrics in Sl. No. 14 of this notification is not an unconditional exemption and is subject to condition that such unprocessed knitted fabrics had been made out of duty paid yarn and no Cenvat credit has been taken and in view of this any unprocessed fabric purchased from the market cannot be treated as unconditionally exempt from duty and hence non-duty paid

Summary

In the appellate tribunal CESTAT, New Delhi judgment of 2009, the case involved a dispute between the Revenue and the Respondent regarding the concessional rate of duty for processed knitted fabrics. The Respondents were manufacturing processed fabrics and availing the concessional rate under a specific notification. A show-cause notice was issued to them, demanding differential duty due to the belief that the fabrics were not made from duty-paid fabrics. The Commissioner (Appeals) set aside part of the duty demand, stating that the processed fabrics were made from grey fabrics manufactured in the Respondent's own factory, making them eligible for the concessional rate of duty. The Revenue challenged this decision, claiming that the fabrics were made from unprocessed fabric purchased from the market, and therefore not eligible for the concessional rate.

The tribunal carefully considered the arguments and examined the relevant notifications and circulars. It was determined that the fabrics made from grey-unprocessed knitted fabrics purchased from the market should be treated as duty paid, as per the provisions of the notification. The tribunal disagreed with the Revenue's contention that the fabrics were not duty paid, as the notification deemed textile yarn, fiber, or fabrics as duty paid even without specific documentation. Additionally, the exemption for unprocessed knitted fabrics was found to be conditional and not unconditional, meaning that any unprocessed fabric purchased from the market could not be considered unconditionally exempt from duty. Therefore, the tribunal found no issues with the Commissioner (Appeals) decision and dismissed the Revenue's appeal. The judgment was pronounced on May 13, 2009.