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TMI Blog2014 (11) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... tion II of Notification No.14/2002-CE creates a fiction that for the purpose of condition of this notification taxable yarn or fabrics shall be deemed to be duty paid even without production of documents evidencing payment of duty. For a claim under Sr. No. 12 of Notification No.14/2002-CE by an assessee it can not be presumed that all grey cotton fabrics received by a textile processor is not duty paid because Sr. No. 10 of the same notification exists. It is also relevant to note that exemption under Sr. No. 10 of this exemption notification is not unconditional but is subject to certain conditions. Thus, the grey fabrics available in the market may not be 100% grey fabrics on which no duty has been paid. That is why a fiction is created under Explanation-II that for the purpose of condition of this notification textile yarn or fabrics shall be deemed to have duty paid even without production of duty paying documents. There is no expression like, ‘except good which are clearly recognizable as non duty paid’ in Explanation-II of Notification No. 14/2002-CE, to have any doubt. It is evident from the above Explanatory Notes that framers of Notification No.14/2002-CE wanted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adv.e Shri D. Parikh Sr. Adv For the Respondent : Shri Raju, Jt. CDR Shri K. Sivakumar, A.R. ORDER Per : Mr. H.K. Thakur; The issue referred to this Larger Bench is whether the benefit of Sr. No. 12 of Table annexed to Notification No. 14/2002-CE dated 01.03.2002 will be admissible to the processed knitted and crocheted cotton fabrics, when read with Condition 3 and Explanation-II to the said notification, if actual duty payment nature of the base fabrics is not established. Larger Bench was constituted to examine the above issue as there are conflicting judgments of CESTAT on the subject matter. In the case of CCE Ludhiana vs. Prem Industries [2009 (242) ELT 588 (Tri. Del.)], CESTAT Delhi Bench held that by virtue of Explanation -II of exemption Notification No. 14/2002-CE the grey fabrics purchased from the market should be deemed to be duty paid eligible to exemption under Sr. No. 16 of the exemption notification when processed. This view was also adopted by CESTAT, Mumbai [2005 (189) ELT 228 (Tri. Mum.)] and Morarjee Gokuldas Spg. Wvg. Company Limited vs. CCE Mumbai [2005 (190) ELT 217 (Tri. Mum.)]. Subsequently by a series of following case laws it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due and harmonious meaning/ interpretation. It was also his case that Apex Courts judgment in the case of Dhiren Chemical Industries (supra) is not applicable to the facts and circumstances of the present appeals as neither a legal fiction of deemed duty paid nor the words read with any notification for the time being in force were used in Notification No. 185/83-CE interpreted by the Hon'ble Apex Court in Dhiren Chemical Industries case. That underlying concept of avoiding cascading effect will be defeated if exemption is denied at Sr. No. 12 as per the interpretation of the Revenue. That condition No. 3 of Notification No. 14/2002-CE was amended under Notification No.3/2003-CE dated 06.01.2003 where duty paid words were not existing. It was his case that amendment carried out under Notification No. 3/2003-CE is retrospective in view of the following case laws:- (i) Allied Motors Pvt. Limited - [1997 3 SCC 472] (ii) Belapur Sugar Allied Industries - [1999 (108) ELT 9 (SC)] (iii) UOI vs. Steel Authority of India -[2013-TIOL-384 (Chhattisgarh-HC)] Learned advocate also made the bench go through the relevant notifications and the relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the following arguments during hearing as well as through written submissions:- (i) That as per Sr. No. 10 of Notification No. 14/2002-CE dated 01.3.2002 unprocessed knitted and / or crocheted fabrics of cotton falling under Chapter 60 or Central Excise Tariff Act, 1985 was chargeable to Nil rate of duty, and the same is further used in the manufacture/ processing of cotton knitted fabrics. (ii) That as the unprocessed knitted and/ or crocheted fabrics does not bear any duty paid therefore, exemption under Notification No. 14/2002-CE cannot be extended to the appellants in the light of law laid down by the Apex Court in the case of Dhiren Chemicals Industries (supra). (iii) That the words read with any notification for the time being in force used in Notification No. 14/2002-CE does not make any difference as dealt with in Para 23 and 26 of the CESTAT order in the case of Auro Textile vs. CCE Chandigarh (supra). (iv) That amendment to Condition 3 of Notification No. 14/2002-CE under Notification No. 3/2003-CE dated 06.1.2003 is a major and substantial change in the notification and cannot be considered as a clarificatory judgment as cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, if actual duty payment condition is not fulfilled. 8.1 For ease of reference Sr. No. 12, Condition -3 and Explanation-II of Notification No. 14/2002-CE are reproduced below:- Table S. No. Chapter or heading No., or sub-heading No. Description Rate of duty Condition 1 to 11, 12 6001.11, 6001.21, 6001.91, 6002.42 or 6002.92 Knitted or crocheted fabrics of cotton, subjected to any process Nil Condition No. 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en without production of documents evidencing payment of duty. In view of the above, it can not be said as held inter-alia by CESTAT in the case of Auro Textiles (supra) that a simple and plain reading of the exemption Notification No. 14/2002-CE is available. In the existing set of facts and circumstances a harmonious construction/ interpretation is required to be made to understand the intention of the framers of Notification No. 14/2002-CE. If a view is taken that all the goods lying in the market are non duty paid by virtue of Sr. No. 10 of Notification No.14/2002-CE then Explanation-II to this notification becomes redundant. Secondly, by presuming that all categories of grey fabrics supplied to the appellants have not discharged any duty that interpretation will be like creating another fiction that all grey fabrics lying in the market are deemed not duty paid , unless established by an assessee availing exemption under Notification No. 14/2002-CE. For a claim under Sr. No. 12 of Notification No.14/2002-CE by an assessee it can not be presumed that all grey cotton fabrics received by a textile processor is not duty paid because Sr. No. 10 of the same notification exists. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under the Cenvat Credit Rules. 8.5 It is evident from the above Explanatory Notes that framers of Notification No.14/2002-CE wanted to extend the benefit of this exemption to the manufacturers subject to the only condition that no cenvat credit is taken/ not taking of such cenvat credit was not only restricted to inputs but was also to capital goods. It is further clarified that benefit of rate of duty should be allowed without insisting upon any documentary proof of payment of duty. In view of the above legislative intent, we do not agree with the views expressed by CESTAT two Member judgment in the case Auro Textile vs. CCE Chandigarh (Supra) in Para 25 that reliance of the appellant on Explanatory Notes to Budget of 2002 cannot be of any assistance to the assessee. It has been rightly argued by the Senior Advocate in the present proceedings that if the views of the Revenue are accepted than it will lead to chaos and absurdity because making a manufacturer to pay duty again after breading cenvat chain by not taking credit, will burden small processing manufacturers to pay duty again on the processed fabrics when no credit on inputs is taken. Indirectly all the textile proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Sastri, C.J. in the case of Aswini Kumar Ghose v. Arabinda Bose, 1953 SCR 1 had held that it is not a sound principle of construction to brush aside words in a statute as being inapposite surplusage, if they can have appropriate application in circumstances conceivably within the contemplation of the statute. In Quebec Railway Light Heat and Power Company v. Vandray, AIR 1920 PC 181, it has been observed that the Legislature is deemed not to waste its words or to say anything in vain and a construction which attributes redundancy to the legislature will not be accepted except for compelling reasons. Similarly, it is not permissible to add words to a statute which are not there unless on a literal construction being given a part of the statute becomes meaningless. But before any words are read to repair an omission in the Act, it whould be possible to state with certainity that these words would have been inserted by the draftsman and approved by the legislature had their attention been drawn to the omission before the Bill had passed into a law. At times, the intention of the legislature is found to be clear but the unskilfulness of the draftsman in introducing certain words in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a). 10. So far as retrospective nature of Notification No. 3/2003-CE dated 06.01.2003 is concerned it is observed that another amendment to Notification No. 14/2002-CE dated 01.3.2002 was also made under Notification No. 37/2002-CE dated 03.07.2002 when Explanation-VII was added to Notification No. 14/2002-CE. This explanation added reads as follow:- Explanation VII. - In this notification, - (1) for the removal of doubt, it is hereby clarified that in Explanation II and in condition Nos.1 and 2 specified below the Table, the expression textile yarns is intended to include therein textile fibres also: (2) for the purposes of the exemption to processed textile fabrics, specified in the Table against any of the S. Nos. 3, 4, 6, 7, 8, 13 and 16, manufactured by a composite mill (i.e., a manufacturer engaged in processing of fabrics along with the spinning of yarn from fibres and weaving or knitting or crocheting of fabrics within the same factory), or by a manufacturer engaged in processing of fabrics along with weaving or knitting or crocheting of fabrics within the same factory, the condition specified in column (5) against each of the said respective S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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