2000 (3) TMI 369 - AT - Central Excise

Summary

Issues:
1. Levy of cess on jute products used in another factory under Chapter X Procedure.
2. Applicability of exemption notification under Central Excise Act to cess imposed by Jute Manufactures Cess Act.
3. Interpretation of Rule 3 of Jute Cess Rules, 1984 regarding the removal of jute goods for sale or consumption within the country.

Analysis:

1. Levy of Cess on Jute Products Used in Another Factory: The appellant argued that jute yarn, twine, and other jute products manufactured in their factory and cleared to another factory owned by them should be considered as used captively, thus exempt from cess. The Tribunal noted that the exemption from central excise duty extended to jute products used in another factory under Chapter X Procedure does not apply to cess under the Jute Manufactures Cess Act, 1983. The Tribunal emphasized that the jute products cleared under Chapter X Procedure cannot be considered as captive consumption, as evidenced by the separate proviso in Notification No. 121/94-CE. Therefore, the Tribunal held that the removal of jute products to another factory does not qualify as captive consumption, and cess is applicable.

2. Applicability of Exemption Notification to Cess: The appellant contended that since an exemption notification under the Central Excise Act applied to jute products used in another factory, the same should apply to cess as well. However, the Tribunal cited a Calcutta High Court case, stating that exemptions under the Central Excise Act do not cover the levy of cess under the Jute Manufactures Cess Act. Therefore, the Tribunal ruled that the removal of jute products to another factory does not constitute captive consumption, and cess is applicable, irrespective of the exemption under the Central Excise Act.

3. Interpretation of Rule 3 of Jute Cess Rules, 1984: The appellant argued that since there was no sale of jute goods and they were consumed by their own mill, Rule 3 of the Jute Cess Rules, 1984, regarding the removal of jute goods for sale, did not apply. However, the Tribunal found that there was no explicit finding by the original adjudicating authority on whether the jute products were sold to M/s Murlidhar Ratanlal Exports Ltd. and if cess was paid by them. Therefore, the Tribunal remanded the matter to the original adjudicating authority for a decision on this issue, indicating that the provisions of Rule 3 would depend on the actual sale and consumption of the jute products.

In conclusion, the Tribunal allowed the appeal for a fresh decision based on the observations made, emphasizing the applicability of cess on jute products cleared to another factory, the non-applicability of Central Excise Act exemptions to Jute Manufactures Cess Act, and the need for a clear determination on the sale and consumption of jute products as per Rule 3 of the Jute Cess Rules, 1984.