1995 (8) TMI 138 - AT - Central Excise

Summary

Issues:
- Interpretation of Notification No. 175/88-C.E. dated 13-5-1988 as amended by Notification No. 63/91-C.E. dated 25-7-1991 regarding exemption from duty on steel tubes made from HR/CR strips.
- Whether steel tubes manufactured and cleared for captive consumption under Chapter X procedure could be eligible for the benefit of the exemption notification.

Analysis:
The appeal before the Appellate Tribunal CEGAT, New Delhi challenged the order passed by the Collector of Central Excise, Jamshedpur, regarding the eligibility of the appellants to avail exemption from duty on steel tubes manufactured from HR/CR strips under Notification No. 175/88-C.E. dated 13-5-1988 as amended by Notification No. 63/91-C.E. dated 25-7-1991. The appellants contended that their steel strips were received without payment of duty for captive consumption and thus, they were entitled to the benefit of the exemption. The Collector, however, confirmed the demand for duty stating that the exemption was not admissible for strips received prior to 25-7-1991 without duty payment under Chapter X procedure.

In the case, the appellants argued that the expression "already paid" in the context of duty exemption should be interpreted to mean "contracted to be paid" or "ought to have been paid." They cited judgments of the Patna High Court and the Tribunal to support their contention. The Patna High Court's decision in Tata Yodogawa Limited v. Union of India held that duty exemption on final products is available when the appropriate duty has been paid on the raw material, including situations where the raw material was cleared at nil duty under an exemption notification.

The Tribunal, following the Patna High Court's judgment, ruled in the case of I.E.L. Ltd. v. Collector of Central Excise, Bombay, that duty exemption on final products is admissible even if the raw materials were cleared at nil duty under an exemption notification. The Tribunal emphasized that the appropriate payment of duty should be understood as duty that ought to have been paid or contracted to have been paid, including situations where duty under an exemption notification is nil. Thus, goods cleared without payment of duty can be considered as duty paid goods.

Consequently, the Appellate Tribunal CEGAT, New Delhi, allowed the appeal and set aside the order of the lower authority based on the interpretations provided by the Patna High Court and the Tribunal. The Tribunal's decision aligned with the principle that duty exemption on final products is available when the raw materials, even if cleared at nil duty under an exemption notification, meet the criteria of "appropriate duty" being paid.