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TMI Blog2016 (8) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... , in the form of Explanation II. It, therefore, becomes clear that when Explanation II states that the duty shall be deemed to have been paid even without production of documents evidencing payment of duty thereon, it was clearly meant that no duty was required to be paid by the manufacturers of knitted garments. Such an intention is clearly reflected in the Government's own Budgetary Notes extracted above. We, thus, hold that Explanation II to the said exemption Notification Nos. 14/2002 and 15/2002 create legal fiction and that was the precise purpose for which this explanation was added. It is trite law that a fiction created by a provision of law is to be given its due play and it must be taken to its logical conclusion. It would be pertinent to mention here that Condition No. 3 which uses the words “read with any notification for the time being in force” was put in place to overcome the interpretation that was given by this Court in Dhiren Chemical Industries case. Benefit of exemption notification would be available to all these assessees. - Decided against the revenue. - CIVIL APPEAL NO. 1288 OF 2005 - - - Dated:- 4-3-2016 - A.K. SIKRI AND ROHINTON FALI NARI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note of the facts appearing in Civil Appeal No. 1288 of 2005 which is preferred by an assessee. 4. Assessee is an integrated textile apparel manufacturer. Assessee purchases excise duty paid yarn from the market on payment of excise duty. Assessee does not take any MODVAT credit of the duty paid on the yarn. Assessee manufactures the knitted fabrics in its factory out of the duty paid yarn. The knitted fabric is entirely captively consumed in the manufacture of knitted apparels. The apparels are thereafter cleared outside the factory. 5. Vide Union Budget 2002, a new excise duty scheme for textile sectors was introduced. Under this scheme, vide Notification Nos. 14/2002-CE and 15/2002-CE dated 01.03.2002, fabric manufacturers and garment manufacturers were given an option to operate under two different schemes. Under one scheme, where the manufacturers of the fabric or garment wants to avail the MODVAT credit of the duty paid on the inputs or the capital goods, excise duty @ 75% of the normal rate of duty of 12% was levied. Under another scheme, where the manufacturers do not want to avail of the MODVAT facility, complete exemption from excise duty to the fabrics and garm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner on the aspect of denial of Notification No. 15/2002-CE to the apparels. However, the Tribunal has set aside the penalty imposed on the assessee. 9. A perusal of the order of the Tribunal would reveal that for coming to this conclusion, the Tribunal has referred to and relied upon the judgment of this Court in CCE, Vadodara v. Dhiren Chemical Industries . In that case, exemption notification came up for consideration and interpreting the phrase on which the appropriate amount of duty of excise has already been paid , the Court held that in order to avail the benefit of the notification, it was incumbent upon the manufacturer to actually pay the duty, in the following words: An exemption notification that uses the said phrase applies to goods which have been made from duty paid material. In the same 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, been paid, and has been paid at the appropriate or correct rate. Unless the manufacturer has paid, the correct amount of excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y paid on the inputs or the capital goods, were supposed to pay excise duty at concessional rate i.e. 75% of the normal rate of duty. Under the other scheme, full exemption from payment of duty was granted to those who did not wish to avail the MODVAT credit facility. These two schemes were explained in the Budget Explanatory Notes issued by the Central Government, relevant portion whereof is extracted below: In the case of processed knitted fabrics of cotton, which were hitherto exempt from duty, an optional levy of 12% [8% Cenvat + 4% AED(ST)] has been prescribed. That is, if the manufacturer wants to avail cenvat credit of the duty paid on inputs (either on deemed basis or actual basis) and capital goods (on actual basis), he will be required to pay duty at 12% adv. [8% cenvat + 4% AED(ST)]. If he does not want to avail any credit on inputs and capital goods, he is not required to pay any duty. The rates of deemed credit for processed knitted fabrics of cotton are the same as applicable to woven fabrics. Notification Nos. 14/2002-CE and 15/2002-CE, both dated 01.03.2002 prescribes effective rates of duty of 'nil' or 12% adv. in the case of textile fabrics subj ..... X X X X Extracts X X X X X X X X Extracts X X X X
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