2009 (7) TMI 962 - AT - Central Excise

Summary

In the case of Appellate Tribunal CESTAT, CHENNAI, the judgement was made by Dr. Chittaranjan Satapathy. The appellant, represented by Shri M.N. Bharathi, Advocate, argued that they procured cotton yarn under Rule 19(2) of the Central Excise Rules, 2002, and manufactured fabrics for export. The fabrics were procured from M/s. Cotton Crafts Exports without payment of duty and were ultimately exported. The impugned demand against the appellants was based on the fact that the export of cotton fabrics was not done by themselves. Shri R.P. Meena, JDR, represented the respondent and supported the impugned order.

After considering the submissions and perusing the records, the Tribunal observed that Rule 19(2) of the Central Excise Rules, 2002, does not stipulate that the person who obtained the raw material should directly export the finished goods. There is also no requirement that the export cannot be done through a merchant exporter. The merchant exporters in this case obtained duty-free goods under CT-1 Certificates from the excise authorities for export. The authorities did not correlate the duty-free yarn obtained by the appellants with the fabrics exported by M/s. Cotton Crafts Exports, despite a request from the appellants.

Consequently, the impugned order was set aside, and the matter was remanded to the original authority with directions to consider the documents produced by the appellants. The authority was instructed to examine whether the fabrics exported by M/s. Cotton Crafts Exports could be correlated with the duty-free cotton yarn obtained by the appellants and the fabrics supplied by them. If such correlation was possible, there would be no basis for raising a demand against the appellants for violating Rule 19(2) of the said Rules. The appellants were to be given a reasonable opportunity of hearing before a fresh order was passed.

In conclusion, the appeal was allowed by way of remand, and the judgement was dictated and pronounced in open court.