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TMI Blog2020 (9) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... at nil rate, but in view of Circular/ clarification issued, the interpretation made in circular will be binding on the revenue authorities. However this view was not concurred by the Hon ble Supreme Court and in case of Kalyani Packaging [ 2004 (5) TMI 78 - SUPREME COURT ], Hon ble Supreme Court held that cases where benefits has been granted, cases should not be reopened. Otherwise Courts/Tribunals can not ignore a judgment of this Court and follow circulars of the Board - The decision of Kalyani Packaging was affirmed by the five member bench of Hon ble Supreme Court in case of Rattan Wire and Melting [ 2008 (10) TMI 5 - SUPREME COURT ]. Five Member bench of Hon ble Supreme Court has in case Dilip Kumar Co [ 2018 (7) TMI 1826 - SUPREME COURT ] settled the law in favour of strict interpretation of exemption notification and resolution of ambiguity in the interpretation of notification if any in favour of revenue. Thus, we are not in position to agree with the decision rendered by the Mumbai Bench of CESTAT, in case of M/S. TECHNOCRAFT INDUSTRIES (I) LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, THANE I [ 2019 (8) TMI 719 - CESTAT MUMBAI ], relied upon by the counsels for Appellant - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , appropriate interest thereon and penalty within 30 (thirty) days from the date of receipt of this order. 2.1 Appellant is an 100% Export Oriented Unit (EOU), engaged in manufacture and clearance for export of Cotton Yarn, as per the extant Export Import Policy, at the relevant time, after availing the admissible exemption notifications issued under the Customs Act, 1962 and Central Excise Act, 1944 2.2 Appellants procured the raw material and consumables used for manufacture of their finished goods without payment of duty, by availing the exemption as per notification no. 1/95-CE dated 4th January 1995 and no. 22/03-CE dated 31st March 2003 pertaining to domestic procurement of raw materials and consumables and notification no. 53/97-Cus dated 3rd June 1997 and no. 52/03-Cus dated 31st March 2003 pertaining to imported raw materials and consumables. 2.3 Appellant had cleared Cotton Waste arising during the course of manufacture, to Domestic Tariff Area (DTA) on payment of duty at nil rate. 2.4 Proceedings were initiated against the appellant for recovery of duty on the inputs (raw materials and consumables used in the manufacture of Cotton Waste, so cleared at nil rate of duty, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench in case of Technocraft Industries in light of decisions referred above. 4.1 We have considered the impugned order along with submissions made in appeal and during the course of hearing on appeal. 4.2 Undisputedly Appellant is an Export Oriented Unit, established as per procedure prescribed for setting up of such units as per Export Import Policy (EXIM Policy). They procure without payment of duty, raw materials and consumables (collectively called inputs) as per the exemptions notifications issued by the Government under Customs Act, 1962 or Central Excise Act, 1944 as the case may be. They manufacture and clear cotton yarn either for export or in DTA in the manner as prescribed by the EXIM Policy. After obtaining necessary permissions from the Development Commissioner they clear cotton waste on payment of nil duty. 4.3 The inputs used by the Appellant were procured by them without payment of duty, as per the exemptions notifications, which prescribed following condition- Notwithstanding anything contained in the notification, the exemption contained herein shall also apply to the said goods used for the purposes of production, manufacture, processing or packaging of articles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture and were not the duty free goods removed as such. The only issue that arises is the discharge of duty liability and the dispute is limited to the non-payment of duty arising from non dutiability. It is clear from the decision of Aarti Industries Ltd that cotton waste , even though subject to nil rate of duty, is considered to be excisable. In Winsome Yarns Ltd v. Commissioner of Central Excise, Chandigarh [2001 (127) ELT 833 (Tri-Del)] the Tribunal was concerned with an identical dispute and it was held that 4. We have considered the submissions of both the sides. The 100% E.O.Us. are provided facilities, among other things, of importing capital goods, raw-material, components etc. without payment of customs duty and also of obtaining similar goods from domestic market without payment of Central Excise duty. These units have also been provided facility to sell a specified quantity of their products in Domestic Tariff Area in India. Section 3 of the Central Excise Act provides that the duty of excise shall be an amount equal to the aggregate of the duties of Customs on like goods produced or, manufactured outside India, if imported into India. It is thus apparent that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been held to be rejects and waste and they were cleared in the domestic market as per the permission granted by the Development Commissioner. Under these circumstances, no case of diversion or use of the raw materials procured duty free for a purpose other than intended purpose, has been made out. Therefore, no valid grounds have been adduced to interfere with the findings of the Commissioner in so far as non-demand of duty on the raw materials and not taking the consequential penal action. In the decision of the Constitution Bench of the Hon'ble Supreme Court in re Dhiren Chemical Industries, reference arose in view of the conflict between the decisions in Collector v. Usha Martin Industries [1997 (7) SCC 47] and Motiram Tolaram v. Union of India [1999 (6) SCC 375] on the duty liability of inputs that were cleared without duty for use in the manufacture of final product on which duty has been paid but were utilised in manufacture of exported finished goods. In that context, and in accordance with the policy imperative behind such an exemption, the Hon'ble Supreme Court held that 6. An exemption notification that uses the said phrase applies to goods which have been mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter of clearance of domestic tariff area are subject to higher duties than a corresponding domestic unit is. The policy prescription also includes a ceiling on the quantity of goods that may be sold in the domestic market. A unit operating outside the scheme is subject only to the duties of excise on their finished products and there is no limit on the clearance that may be effected from the factory. The scheme of conditions in the exemption notifications under the Central Excise Act, 1944 and Customs Act, 1962 are intended to ensure that a unit operating under the scheme does not derive any unintended advantage vis- -vis a unit operating outside by utilisation of exempted raw material and consumables. It cannot have been the conception behind the scheme to subject the waste generated by such units to a levy that is not less than that devolving outside the scheme; more so, as the cost of production of the finished goods invariably subsume the value of the materials that are embedded in the waste. Hence such value have already been either included in the obligation for export or subject to rate of duty not less than that suffered by a domestic unit and does not confer any unwarrante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in question, which used the said phrase. The Court was unable to agree. It said that the raw material being an item which was manufactured in India, a rate of excise duty was leviable thereon. On the raw material which had been imported, the appropriate amount of duty had not been paid. It was only if this payment had been made that the exemption notification would be applicable. 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 has been mislaid. All that the word appropriate in the context means is the correct or the specified rate of excise duty. 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, been paid, and has been paid at the appropriate or correct rate. Unless the manufacturer has paid, the correct amount of excise duty, he is not entitled to the benef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ady been granted, the Revenue would remain bound. The purpose was to see that such cases were not reopened. However, this did not mean that even in cases where Revenue/Department had already contended that the benefit of an exemption Notification was not available, and the matter was sub-judice before a Court or a Tribunal, the Court or Tribunal would also give effect to circulars of the Board in preference to a decision of the Constitution Bench of this Court. Where as a result of dispute the matter is sub-judice a Court/Tribunal is, after Dhiren Chemical's case, bound to interpret as set out in that judgment. To hold otherwise and to interpret in the manner suggested would mean that Courts/Tribunals have to ignore a judgment of this Court and follow circulars of the Board. That was not what was meant by Para 9 of Dhiren Chemical's case. 7. In this case, as set out above, even the benefit of a Circular is not available. Therefore the interpretation given in Dhiren Chemical's case would apply. Thus we see no infirmity in the impugned Judgment. The Special Leave Petition stands dismissed. 4.8 The decision of Kalyani Packaging was affirmed by the five member bench of Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on yarn is first converted into the nylon twine and the twine is used for the manufacture of fishing nets. Vide Notification No. 6/2002-CE dated 1.3.2002, all goods made from yarn, monofilament, tapes or strips on which the appropriate duty of excise leviable under the First Schedule, the special duty of excise leviable under the Second Schedule or, as the case may be, the additional duty leviable under the Customs Tariff Act, 1975 has already been paid, was exempted from duty. In the present case, since nylon twine is manufactured from nylon yarn, which is exempted from duty, the exigibility of nylon twine arose. The Hon'ble Apex Court in the case of Commissioner of Central Excise, Vadodara Vs. Dhiren Chemical Industries 2002 (139) ELT 3 (SC) held that the expression appropriate duty of excise duty leviable means some duty ought to have been paid and it would not include raw materials, which is not leviable to excise duty or such duty is Nil. Subsequent to this decision of the Hon'ble Apex Court, the CBE C vide Circular No. 667/58/2002-CX dated 26.9.2002 clarified that in the light of the Apex Courts decision in the case cited supra, nil duty paid goods or fully excisable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry ; that exact wisdom and nice adaption of remedy are not always possible and that judgment is largely a prophecy based on meagre and uninterpreted experience . Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United States Supreme Court in Secretary of Agriculture v. Central Roig Refining Company [94 L Ed 381 : 338 US 604 (1950)] be converted into tribunals for relief from such crudities and inequities. There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation which may be made by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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