2017 (1) TMI 1278 - AT - Central Excise

Benefit of exemption N/N. 14/2002-CE - denial on the ground of decision passed in the case of Dhiren Chemical Industries 2001 (12) TMI 3 - SUPREME COURT OF INDIA , where it was held that Notification exempting finished goods if made from materials on which the appropriate amount of duty of excise has already been paid - Held that - the issue is no more res-integra, similar issue decided in the case of M/s Arora Knit Fabrics Pvt. Ltd. 2016 (8) TMI 117 - CESTAT CHANDIGARH , where it was held that benefit of N/N. 14/2002-C.E., should be available if no credit is taken by the manufacture. For such interpretation Explanation-II to N/N. 14/2002-C.E., creating fiction of Deemed duty paid , becomes relevant and has to be harmoniously read with the conditions prescribed under N/N. 14/2002-C.E. It is also a well accepted judicial discipline that if two interpretations of a statute are possible then the one more favourable to the tax payer should be taken - the assessee is entitled for benefit of exemption under N/N. 14-15/2002-CE dated 01.03.2002 - appeal allowed - decided in favor of assessee.

Summary

Issues:
1. Whether the appellant is entitled to the benefit of exemption under Notification No. 14/2002-CE?
2. Whether the respondent is entitled to the benefit of exemption under Notification No. 14/2002-CE?

Detailed Analysis:
1. The first issue revolves around the appellant's eligibility for exemption under Notification No. 14/2002-CE. The appellant, engaged in manufacturing cotton knitted fabrics and garments, availed the benefit of certain notifications providing for nil rate of duty under specific conditions. The department alleged that the garments must be manufactured from duty-paid fabrics to qualify for the exemption. The Original Adjudicating Authority confirmed the duty demand but allowed cum-duty benefit. The Order-in-Appeal upheld this decision, relying on the judgment in CCE, Vadodara v. Dhiren Chemical Industries. The appellant challenged this decision, arguing that the legal fiction created by Explanation II to the exemption notification deems duty paid even without documentary evidence. The Tribunal referred to previous cases and the Apex Court's ruling in Sports & Leisure Apparel Ltd., concluding that the appellant is indeed entitled to the exemption under Notification No. 14/2002-CE. Consequently, the appellant's appeal was allowed.

2. The second issue pertains to the respondent's entitlement to the exemption under Notification No. 14/2002-CE. The respondent, involved in manufacturing cotton knitted fabrics, faced allegations of not paying duty on processed fabrics cleared before a specific date. The respondent claimed entitlement to clear goods at a nil rate of duty under the said notification, but the benefit was denied based on the Dhiren Chemical Industries case and a show cause notice was issued. The Commissioner (A) set aside the adjudication order, granting the benefit of exemption. The Revenue appealed this decision, questioning the respondent's eligibility for the exemption. The Tribunal consolidated both appeals to address the common issue. Relying on precedents and the legal fiction created by Explanation II, the Tribunal held that the respondent is entitled to the benefit of exemption under Notification No. 14/2002-CE. Consequently, the respondent's appeal was allowed, while the Revenue's appeal was dismissed, upholding the lower authority's decision to grant the exemption.