2024 (10) TMI 805 - AT - Central Excise

Eligibility for exemption under N/N. 30/2004-CE - Clearing Texturized Yarn under chapter 54 of CETA - Knitted Fabrics under chapter 60 of the CETA - assesse s contention is that they are exempted from payment of duty under Notification No.30/2004-CE dated 09.07.2004 on the clearances of texturised yarn and knitted fabrics manufactured out of POY, which was not procured from outside, does not fall under the ambit of the said notification - Extended period of limitation. HELD THAT - N/N. 30/2004-CE dated 09.07.2004 as amended vide N/N. 10/2005 dated 01.03.2005 exempts all filament yarn procured from outside and subjected to any process by a manufacturer who does not have the facilities in his factory (including plant and equipment) for manufacture of filament yarns of chapter 54, from payment of whole of Central Excise Duty. Further, benefit of Notification is available to goods of Chapter 54 and 60 of Central Excise Tariff if credit of duty on inputs or capital goods has not been taken under the provisions of the Cenvat Credit Rules, 2002/2004. In the present matter Appellant claimed the all the manufacturing areas are to be treated as separate entity and we find support in claim of the Appellant. M/s. SPPL obtained Central Excise Registration dated 14.05.2004 for manufacture of POY falling under Chapter sub-heading No. 5402 42 and texturized yarn under chapter heading No. 540232. It is noticed that appellant vide their letter dated 21.02.2014 filed the application for amendment in their Central Excise Registration certificate they had submitted the new factory ground plan, in addition they had also filed online Application in Form A-1 on 21.02.2004. The Knitted Fabric falls under Chapter 60 and as per above entry it does not have any other condition except that the assessee should not avail the Cenvat credit on the input. In the case of knitted fabric, even though the unit No.1 availed the Cenvat credit but the excise duty on the POY was paid and such duty paid goods was subsequently used by unit No.2 3 but no Cenvat credit was availed on the POY - Accordingly, in the present case knitted fabric is clearly exempted as no Cenvat credit was availed on its inputs in terms of notification No. 30/2004-C.E. dated 09.07.2004 (Sl.15). Therefore on this alternate finding the knitted fabric is undisputedly exempted. It is clear that even in the same factory if the Cenvat credit is availed on the initial input and used in the manufacture of intermediate product on which excise duty is paid and subsequently no Cenvat credit is availed on the said intermediate goods, the final product manufactured out of the said duty paid intermediate product shall be eligible for exemption carrying condition of non availment of Cenvat credit on input. This view is based on the fact that the final product manufactured is not out of cenvatted input, hence the condition of the notification clearly stands fulfilled. Therefore in the present case knitted fabric is eligible for exemption. Accordingly the duty demand on knitted fabric is not sustainable on this ground also. Extended period of limitation - HELD THAT - Claiming the exemption notification which was in the knowledge of the Revenue, the suppression of fact or mala fide on the part of the appellant cannot be attributed. Further the issue involved is clearly an interpretational issue of exemption notification. Therefore, in the peculiar facts as noted above there is no suppression of fact or mala fide intention on part of the appellant, therefore, the invocation of extended period is illegal and incorrect. Accordingly, the demand for the longer period is not sustainable on the ground of time bar also. The demand is set aside on merit as well as on limitation. The appeals filed by the assesse-appellants are allowed.

Summary

Issues Involved:

1. Eligibility for exemption under Notification No. 30/2004-CE for texturized yarn and knitted fabrics.
2. Interpretation of "his factory" in the context of exemption eligibility.
3. Applicability of the extended period of limitation for demand.
4. Legality of granting the benefit of price-cum-duty.

Detailed Analysis:

1. Eligibility for Exemption under Notification No. 30/2004-CE:

The primary issue was whether the appellant was eligible for exemption under Notification No. 30/2004-CE for clearances of texturized yarn and knitted fabrics. The appellant argued that they were eligible for the exemption as they manufactured POY in a separate building and cleared it on payment of duty to other units that manufactured texturized yarn and knitted fabrics without availing Cenvat credit. The tribunal found that the appellant's units were indeed separate entities, fulfilling the conditions of the notification. The exemption was applicable as the units did not avail Cenvat credit on the inputs received, and the manufacturing activities were conducted in separate buildings, aligning with the precedent set in the Bhilosa Industries case.

2. Interpretation of "His Factory":

The tribunal examined the interpretation of "his factory" within the notification. The appellant contended that this term should be understood as the specific factory where manufacturing activities are conducted, not encompassing all factories owned by the manufacturer. The tribunal agreed, referencing the Bhilosa Industries judgment, which clarified that "his factory" refers to the individual factory where the manufacturing process occurs. This interpretation supports the appellant's claim that their separate units qualify for exemption, as the term does not imply all factories under a single legal entity.

3. Applicability of the Extended Period of Limitation:

The tribunal addressed whether the extended period of limitation was applicable for issuing the show cause notice. The appellant had informed the department about their manufacturing setup and exemption claims through letters and applications. The tribunal concluded that there was no suppression of facts or malafide intent by the appellant, as they had duly informed the department of their activities. Given the interpretational nature of the exemption notification and the appellant's transparency, the invocation of the extended period was deemed illegal and incorrect. Consequently, the demand for the longer period was not sustainable on the grounds of time-bar.

4. Legality of Granting the Benefit of Price-Cum-Duty:

The revenue appealed against the adjudicating authority's decision to extend the benefit of price-cum-duty, arguing that it was not in line with the Supreme Court's decision in Amrit Agro Industries Ltd. The tribunal, however, did not find merit in the revenue's appeal. The adjudicating authority's decision to allow the benefit of price-cum-duty was upheld, and the tribunal dismissed the revenue's appeal.

Conclusion:

The tribunal set aside the impugned order, allowing the appeals filed by the assesse-appellants with consequential relief, if any, as per law. The appeal filed by the revenue was dismissed, and the cross-objection was also disposed of. The judgment emphasized the importance of clear interpretation of exemption notifications and the necessity for transparency in manufacturing activities to avoid extended periods of limitation for demands.