2009 (7) TMI 1132 - AT - Central Excise

Summary

Issues involved: Interpretation of conditions for availing concessional rate of duty under Notification No. 6/2000-C.E. and Notification No. 3/2001, and imposition of penalty for non-compliance.

The judgment by the Appellate Tribunal CESTAT AHMEDABAD involved a case where the appellant, engaged in manufacturing Dyed Twisted Yarn, faced a dispute regarding the availing of concessional duty rates. The appellant procured raw material, Polyester Texturised/Crimp Yarn, paid duty on it, and converted it into twisted polyester yarn for use in manufacturing dyed twisted polyester yarn. The Revenue contended that since the dyed twisted yarn was made from non-duty paid twisted yarn, the concessional duty rates did not apply. Consequently, a show cause notice was issued proposing a demand of differential duty, interest, and penalty. The Commissioner confirmed the demand and imposed penalties, which were challenged before the Tribunal.

Upon considering the submissions, the Tribunal noted that the appellant had indeed met the conditions required to avail the benefit of the notifications in question. The conditions specified that the yarn must be manufactured from duty-paid yarn and no credit under certain rules should have been availed during the manufacturing process. The Revenue argued that the conditions were not fulfilled as the dyed twisted yarn was made from non-duty paid twisted yarn. In contrast, the appellant contended that the starting raw material, duty-paid texturised yarn, was used, and no credit was availed. The Tribunal agreed with the appellant, emphasizing that the duty-paid texturised yarn was the basic raw material, and using it to manufacture twisted yarn, which was then used in making dyed yarn, satisfied the notification's conditions.

The Tribunal referenced a previous decision involving a similar condition in a different notification to support its interpretation. In that case, it was held that manufacturing dyed yarn from duty-paid single yarn, even if an exemption was availed at an intermediate stage, still qualified for exemption. Applying this precedent, the Tribunal concluded that the appellant had fulfilled the notification's conditions, and the demand for duty was unjustified.

Additionally, the Tribunal found that the demand was time-barred as it was raised beyond the normal one-year period. The appellant had declared and recorded the concessional duty availed, and the Tribunal disagreed with the Commissioner's view that this constituted misdeclaration. It was clarified that claiming exemption did not amount to misrepresentation, and there was no intent to evade duty. Therefore, the appeals were allowed on merit and limitation, providing relief to the appellants.