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TMI Blog2009 (11) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Advocates and the departmental representatives. 3. In all these cases the appellants challenge the orders passed by the lower authorities, original and appellate, denying the benefit of the Notification No. 14/2002-C.E., dated 1-3-2002 allegedly on misconstruction of the conditions attached to the said notification, including the Explanation No. II thereto. 4. In all these appeals one set thereof pertains to the processed cotton fabrics falling under Heading 60.01 of the Tariff Act whereas other set of appeals relates to processed manmade fabrics falling under sub-heading 6002.93 of the Tariff Act. The authorities below relying upon the decision of the Apex Court in the matter of CCE v. Dhiren Chemical Industries reported in 2002 (139) E.L.T. 3 (S.C.) has denied the claim for exemption from the payment of duty and/or claim for concessional duty in terms of the said notification by the assessees. While confirming the demand in relation to duty liability of the assessees, the authorities below have also directed payment of interest and have also, imposed penalty. Hence, the present appeals. 5. Drawing our attention to the impugned orders, the learned Advocates for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... containing any synthetic staples fibres or filament yarns and cotton sewing thread), 165 (Woollen yarn, flax yarn, man-made fibres, man-made filaments except Polyester filament yarn) and 32% (16% Cenvat + 16% SED - Polyester filament yarn). However, in the case of cotton yarn supplied in hank from (plain/straight reel), the duty exemption has been withdrawn and these will be chargeable to duty @ 8% adv. on par with cotton yarn supplied in cone form. Similarly in the case of yarn of artificial staple fibres supplied in hank form (plan/straight reel), the duty exemption has been withdrawn and these will be chargeable to duty @ adv. The above yarns, cleared on or alter 1-3-2002 would attract the appropriate excise duty and would be eligible to avail of Cenvat credit on inputs lying in stock or in process or inputs contained in the final products lying in stock on 28-2-2002 [rule 3(2) of Cenvat Credit Rules, 2002 refers]. All the above yarns and fibres will also be subject to additional excise duty of 15% of the Cenvat or Cenvat + SED tinder the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, except in the case of nylon tyre yarn which has been exempted from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation-II to the said notification. 6. It was further sought to be contended on behalf of the assessees that if the interpretation which is sought to be canvassed on behalf of the Revenue in relation to the said condition is accepted, then the whole object of the said notification would be defeated. Drawing our attention to the explanatory note, it was submitted that, even prior to 2002, the knitted processed fabric was completely exempt from the duty liability. It was further submitted that the mean rate of excise duly leviable on any product in pursuance of the Budget of 2002 was only 12% and by process of interpretation, the Department is seeking to levy the duty @ 24% on the processed knitted fabrics. If the same is accepted would not only be contrary to the intention behind the notification disclosed from the explanatory notes to the Budget, but would also defeat the very purpose of the notification. 7. As regards the decision of the Apex Court in Dhiren Chemical case, apart from the differentiation between the notification which was under consideration before the Apex Court and the one in the case in hand, it is also sought to be contended that there was no explanation claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition specified under the notification, textile yarn and fabric are to be deemed to have been subjected to the duty payment, without insisting for any documentary proof in that regard. The same lend clear support to the contention sought to be raised by the assessee and, therefore, according to the learned Advocates the authorities below clearly erred in denying the benefit under the said notification to the appellants. It is further contention on behalf of the appellants, that the legal fiction created under Explanation II deems and fabric and yarn to have been duty paid without even production documents evidencing the payment of duty and such a legal fiction created thereunder being absolute one, while understanding the scope thereof full effect has to be given thereto. It is further contended that it is settled legal position that while considering the scope of a legal fiction, it would be proper and even necessary to assume of those facts on which alone make the fiction operative and following the observations in various reported cases. It should always be understood that whenever a statute requires one to imagine certain set of facts, while imagining such state of affairs, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... swered by the Apex Court against the assessee. Drawing our attention to the clauses relating to the conditions attached to the notification, it is sought to be contended that the expression "read with any notification" is to be understood with reference to the term "appropriate duty.......has been paid" by the party and cannot be extended to mean that it also relates to a situation where no duty is paid. According to the learned representatives, the situation wherein an assessee does not pay the duty or enjoys the benefit of a notification providing nil rate of duty, it would factually mean that the assessee has not been subjected to actual payment of duty relating to the relevant product. In this regard attention is also drawn to the Circular No. 667/58/2002-CX., dated 26-9-2002. 12. Referring to Explanation II to the said notification and drawing our attention to the decision of the Apex Court in Khemka & Co. v. State of Maharashtra reported in AIR 1975 S.C. 1549 and Bengal Immunity Co. v. State of Bihar and Others reported in AIR 1955 S.C. 661, it is sought to be contended that the fiction which is created under the said explanation is limited for the purpose of conditions atta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der a taxing statue. In such matters, it is settled law that the Courts and Tribunals are not expected either to enlarge or to restrict the scope of exemption benefit assured under such notification. It has been repeatedly reminded by the Apex Court that while interpreting a provision in a taxing statute, the question which should be asked is as to what does the provision of law states on plain reading thereof and what its language disclose according to its natural meaning and as is commonly understood. The Courts and Tribunals have to look squarely at the words of the statute and interpret them. They must interpret a taxing statute in the light of which is clearly expressed and it cannot imply anything what is not expressed. It cannot import a provision in a statute so as to supply any assumed deficiency therein. Bearing this in mind, we will have to analyse the rival contentions sought to be raised in relation to the questions which arise for consideration. 17. The first point relates to the condition attached to the said notification. In order to understand the exact import of the condition, it is necessary to take note of the entire notification itself. The notification in que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble on the excisable goods specified therein, shall be apportioned in the ratio 2 : 1 between the duty leviable under the said Central Excise Act and the said Additional Duties of Excise (Goods of Special Importance) Act. Explanation I. - For the purposes of this notification, the rates specified in column (4) of the said Table are ad valorem rates, unless otherwise specified. Explanation II. - For the purposes of the conditions specified below, textile yarns or fabrics shall be deemed to have been duty paid even without production of documents evidencing payment of duty thereon. Explanation III. - For the purposes of the exemption under S. No. 5 of the Table, - (i) the expression "independent processor" means a manufacturer who is engaged exclusively in the processing of fabrics with the aid of power and who has no proprietary interest in any factory engaged in the spinning of yarn of cotton or weaving of cotton fabrics; and (ii) the value of the fabrics shall be equal to 40% of the value determined under section 4 of the Central Excise Act, 1944. TABLE S. No. Chapter or heading No., or sub-heading No. Description Rate of duty Condition (1) (2) (3) (4) (5) 1 511 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the additional duty of customs leviable under section 3 of the Customs Tariff Act, 1975, as the case may be, has been paid and no credit of the duty paid on inputs or capital goods has been taken under rule 3 or rule 11 of the CENVAT Credit Rules, 2002. 2 If made from textile yarns on which the appropriate duty of excise leviable under the First Schedule or the Second Schedule to the said Central Excise Tariff Act read with any notification for the time being in force or the additional duty of customs leviable under section 3 of the Customs Tariff Act, 1975, as the case may be, has been paid. 3 If made from knitted or crocheted textile fabrics of cotton, whether or not processed, on which the appropriate duty of excise leviable under the First Schedule to the said Central Excise Tariff Act and the Additional Duties of Excise (Goods of Special Importance) Act, read with any notification for the time being in force, or the additional duty of customs leviable under section 3 of the Customs Tariff Act, 1975, as the case may be, has been paid and no credit of the duty paid on inputs or capital goods has been taken under rule 3 or rule 11 of the CENVAT Credit Rules, 2002. 4 If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or payable under the Tariff Act or in terms of any notification issued thereunder, but it is qualified by the expressions like "appropriate duty", "leviable", "under Tariff Act" "read with any notification" and further by specific provision that "has been paid". In other words the obligation contemplated under the condition does not stop by specifying that "the appropriate duty" as has been "leviable" and/or "payable" in accordance with the rate specified in the Tarrif Act or any other notification issued in that regard, but it proceeds further to specify that such duty "has been paid". The condition ex facie clearly requires actual payment of the duty. The condition itself nowhere speaks of any deemed payment. It requires factual payment of duty. A situation described by the words which reveal actual and tactual payment of duty can not be presumed to include diametrical opposite situation. 20. As a rule, a phrase and/or sentence in a statute, including subsidiary legislation, is required to be interpreted according to its grammatical meaning. But the corollary to this rule that the relative and qualifying words, phrases and clauses are to be applied to the antecedent immediatel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty liability is discharged under the first part of the condition. Occasion to claim credit of duty can arise only when duty is actually paid, and not otherwise. And, more important, this condition is not independent of the first part of the condition. It is a continuation of the first part of the condition which speaks of obligation to pay the duty and performance of such obligation by actual payment of duty, which is expressed by the words "has been paid". 22. The Apex Court in Dhiren Chemical industries case has ruled thus :- "5. In our view, the correct interpretation of the said phrase has not been placed in the judgment in the case of Usha Martin. The stress on the word "Appropriate" had been mislaid. All that the word "appropriate" in the context means is the correct or the specified rate of excise duty. 6. An exemption notification that uses the said phrase applies to goods which have been made from duty paid material. In the said phrase, due emphasis must be given to the words "has already been paid". For the purposes of getting the benefit of the exemption under the notification, the goods must be made from raw material on which excise duty has, as a matter of fact, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in particular to the portion which is already quoted herein above. In fact, the said Explanatory Notes do not refer to the condition attached to the notification in question. It is essentially in relation to the Explanation II to the said notification. Being so, the same cannot be of any assistance while dealing with the condition independently of the said explanation. We will deal with the said notes while dealing with the contentions which are sought to be canvassed in relation to the Explanation II. 26. Being so, it is difficult to accept the contention that the benefit under the said notification would be available irrespective of the fact whether the yarn or fabric has been actually subjected to the payment of duty or not. While referring to the expression "any notification for time being in force" and stressing the word "any'" therein, it was sought to be contended that the condition cannot be restricted to those notifications which do not prescribe nil rate of duty and rather, they would include the notifications prescribing nil rate of duty. As already observed above, the expression is qualified by another expression namely "has been paid". Being so, it is not possible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of an assessee which is otherwise required to be performed while claiming any benefit under a taxing statute and it relates to the proof of payment of duty. It is settled law that it is always for the assessee to establish that he has discharged the liability regarding the payment of duty of tax. Only when this primary burden is discharged, the onus shifts upon the department to establish that the assessee is a defaulter. In case of claim benefit under the notification in question, however, the executives have made an exception in favour of the assessees claiming benefit under the said notification. The assessee is absolved of such primary burden The fiction that is created under the notification therefore essentially relates to the requirement of evidence pertaining to the discharge such burden. It cannot be extended beyond the said scope of the fiction. If it is extended to the fact of actual payment itself, it will virtually amount to rewriting the explanation. As already observed above, in order to give full effect to a legal fiction, the Courts and Tribunals are not empowered to create another fiction which is not contemplated under the provision. 31. Explanation II to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itably have flowed from or accompanied it................The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs", it was ruled that "fiction under Section 18A(9)(b) therefore that failure to send an estimate under Section 18A(3) is to be deemed to be a failure to send a return must mean that all those facts on which alone there could be a failure to send the return must be deemed to exist, and it must accordingly be taken that by reason of this fiction, the notices required to be given under Section 22 must be deemed to have been given, and in that view, Section 28 would apply on its own terms". 33. The Apex Court, therefore, has clearly rule that the fiction created under Section 18A(9)(b) which presumed failure to send return leads to presumption about compliance of requirement of service of notice. Because in the absence of service of notice under Section 22(1) and 22(2) of the Indian Income Tax Act, 1922 there could not have been any obligation to comply with the requirement of filing of the return and, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 33 saying that they should be deemed to be restrictive trade practice and in that background there was no much scope for argument that although a particular agreement was covered by one or the other clauses of sub-section (1) of Section 33, still it should not amount to an agreement containing conditions which could be held to be restrictive trade practices within the meaning of the Act. Referring to the said deeming clause it was specifically observed by the Supreme Court that "The legislature by a statute may create a legal fiction saying that something shall be deemed to have been done which in fact and truth has not been done, but even then Court has to give full effect to such statutory fiction after examining and ascertaining as to for what purpose and between what parties such statutory fiction has been resorted to, in the case in hand, the deeming provision relates of the existence of documentary proof relating to discharge of duty liability and not to the factum of "actual payment of duty." 35. In Moon Mills Ltd., case, the Apex Court was dealing with the reference in relation to the issue as to whether in the facts and circumstances of the case before it, the sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urts and Tribunals are not empowered to create another fiction and thereby extend the benefits of the legal fiction under a statute to a totally different situation. 37. Undoubtedly, the explanation in question creates a fiction about the presumption of payment of the duty for the purpose of condition. It does not enlarge the scope of the condition. However, every presumption is rebutable. To interpret the fiction created under the explanation to mean that even in case of a product which is subjected to nil rate of duty to be presumed to have been subjected to the payment of duty would not only result in enlarging the scope of the explanation, but also scope of the condition itself. 38. Under the guise of interpretation of any statutory provision relating to a taxing matter, there is no power vested in the Tribunal to enlarge the scope of the exemption notification or to modify the same. 39. It was sought to be contended that unless the interpretation sought to be canvassed on behalf of the assessees is accepted, it can virtually result in imposing duty of 24% on the products in question and it would virtually result in denial of benefit of the exemption notification to some of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanding of the legislature that the explanation includes the cases where the product is subjected to 'nil' rate of duty. We find the contention to be devoid of substance. A sentence in the explanatory notes cannot be read independently of the context in which it is recorded. The statements in the explanatory note nowhere state that the Explanation II itself discloses that it would include cases where products are subjected to nil rate of duty. On the contrary, it merely speaks of entitlement of the assessee to claim benefit without producing any documentary evidence relating to the payment of duty and is preceded by the sentence wherein the note clearly refers to the condition which the assessees has to comply with in order to avail the benefit under the notification and the same reads that ".......subject to condition that the goods should have been made from textile yarn units and fabrics on which the appropriate excise duty or CVD has been paid". This cannot lead to a conclusion that the assessee can claim the benefit under the said notification without even making any payment of duty nor it could lead to a conclusion that the assessee who had already availed benefit under some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see was not required to make actual payment of duty. Being so, the said decision is also of no help to the appellants. 44. The view that we are taking in this matter was also the view of the Tribunal in the matter of Sports & Leisure Apparel Limited case. It was clearly observed there that the Explanation only takes away the requirement of production of the evidence of duty payment in respect of textile fabrics and it does not anywhere mention that the appropriate duty of excise leviable on textile fabrics need not be paid or that the textile fabrics shall be deemed to have been duty paid even if it was exempted from payment of duty or it has not suffered any payment of excise duty. 45. At this stage, it is worthwhile to refer to the decision in the matter of CCE, Mumbai-I v. Bombay Dyeing & Mfg. Co. Ltd., reported in 2007 (215) E.L.T. 3 (S.C.) wherein, with reference to the notification in question itself, it was observed that "when we come to the Exemption Notification No. 14/2002-C.E., the requirement was that exemption on grey fabrics was admissible subject to the assessee paying duty on yarn before claiming exemption and subject to the assessee not claiming CENVAT credit bef ..... X X X X Extracts X X X X X X X X Extracts X X X X
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