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TMI Blog2025 (1) TMI 1253X X X X Extracts X X X X X X X X Extracts X X X X ..... on delayed payment of aforesaid amount of duty under Section 11AA of the Central Excise Act, 1944;" 1.2 He has also allowed the appeal filed by the Revenue and has consequently imposed penalty of Rs.6,33,781/- i.e. 10% of duty amounting Rs.63,37,805/- on the Appellant under Section 11AC(1)(a) of the Central Excise Act, 1944. 1.3 Aggrieved Appellant has filed this appeal. 2.1 Appellant is engaged in the manufacture of Narrow Woven Fabric falling under chapter sub heading 58063200 of the CETA, 1985. During the course of audit it was noticed that the Appellant was paying central excise duty on finished goods namely Narrow Woven Fabric till April 2015. However, the Appellant has stopped paying duty on Narrow Woven Fabric w.e.f 01.05.2015 and started paying duty under protest on intermediate product i.e. Polypropylene Multifilament Yarn [PPFMY] falling under chapter subheading 54023910. 2.2 On inquiry it was informed that Appellant paid Central Excise duty on intermediate product under protest by observing procedure of valuation for captive consumption as per Central Excise Rules. They also stated that their final product is exempted as per Notification No.30/2004-Central Excise dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken cenvat credit on the inputs used. * In fact the intermediary product on which they have paid duty they have not taken any credit and hence the demand is bad in law. * As demand is not sustainable so the penalty imposed also needs to be dropped. 3.3 Learned Authorized Representative for the Revenue has reiterated the impugned order. 4.1 We have considered the impugned order alongwith the submissions made in the appeal and during the course of argument. 4.2 For confirming the demand against the Appellant impugned order records as follows:- "5.1 I observe that appellant no.1 was engaged in the manufacturing of finished goods namely Narrow Woven Fabrics using inputs namely PP Granules, Master Batch, PP Finish Oil, Textile Tube etc. During the course of manufacture of the finished goods an intermediate products namely Polypropylene Multifilament Yarn also comes into existence and the Commissioner. CEX, Kanpur had confirmed duty on the said intermediate product vide order dated 29.07.11. Feeling aggrieved with the order, the appellant had preferred appeal before the CESTAT which was allowed vide Final Order dated 25.01.2018 holding that the intermediate product ie PPMFY i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It can be seen from the above notification that finished goods i.e Narrow Woven Fabrics (Subheading 58063200) manufactured by the appellant is covered by entry No. 13 of the table. However, as per proviso to this notification, the exemption is not applicable to the goods in respect of which credit of duty on inputs or capital goods has been taken. As per appellant's contention, they have taken CENVAT credit on inputs which are used in the manufacturing of intermediate product PPMFY on which they have paid duty and they have not taken credit of duty paid on said PPMFY which is input for final products, therefore, entitled to exemption provided under said notification. 5.3 The appellant has also claimed that they have a composite unit having continuous manufacturing process wherein spinning of semi-finished goods ie PPMFY is being done followed by subsequent process namely stretching, warping and braiding is done on a needle loom. The PPMFY generate at this stage is not marketable being integrated and inert-winded in a continuous process, the yarn threads are still open with oil contact and are not even open at the stage of being coned or paper coned or paper tuned and still ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng process. The appellant could not stretch the meaning of any notification as per their convenience to avail benefit provided therein. Since, the appellant has availed CENVAT credit on inputs involved in the manufacture of goods they de-barred themselves from taking the benefit of exemption of duty under the Notification No. 30/2004-Central Excise dated 09.07.2004 as the proviso of the said notification specifically provides that "nothing contained in this notification shall apply to the goods in respect of which credit of duty on inputs or capital goods has been taken under the provisions of the CENVAT Credit Rules, 2002". The Supreme Court in the case of Cadila Laboratories Ltd has held that "even if there is right with the assessee to get exemption, the law enjoins that the procedure stipulated in Rule 56A of the Central Excise Rules, 1944 has to be followed and as the respondents did not follow the procedure, the benefit of Notification is not available to them." 5.5 I observe that the Hon'ble Apex Court in the case of Eagle Flask Industries Limited Vs. Commissioner [2004 (171) ELT 296 (SC)] has held as under:-. "We find that Notification 11/88 deals with exemption fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the procedure stipulated in Rule 564 of the Central Excise Rules, 1944 has to be followed and as the respondents did not follow the procedure, the benefit of Notification is not available to them. Similar views have been expressed by the Supreme Court recently in the case of Eagle Flask Industries Ltd (2004-TIOL-74-SC-CX) wherein the exemption notification require the assessee to make a declaration and give an undertaking as specified in the form annexed while claiming exemption for the first time and thereafter before the 15th day of April of each financial year. In that matter, the declaration and the undertaking were not submitted by the assessee. The Supreme Court has held that the declaration undertaken was not an empty formulation. "It is the foundation for availing the benefit under the Notification, it can not be said that they are mere procedural requirements with no consequences attached for non-observance. The consequences are denial of benefit under Notifications for availing benefit under exemption notification, the conditions are to be strictly complied with." The Supreme Court, therefore, did not find merit in the Appeal and dismissed the same. In view of these jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of a directory rule. 26. Whenever the statute prescribes that a particular act is to be done in a particular manner and also lays down that failure to comply with the said requirement leads to severe consequences, such requirement would be mandatory. It is the cardinal rule of the interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way. It is also settled rule of interpretation that where a statute is penal in character, it must be strictly construed and followed. Since the requirement, in the instant case, of obtaining prior permission is mandatory, therefore, non-compliance of the same must result in canceling the concession made in favour of the grantee-the respondent herein". 5.5.4 It can be seen from the aforementioned judicial pronouncements that a taxing statute should be strictly construed & in a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. I find that in the present case the appellant no.1 has availed CENVAT credit on inputs & it has been specifically mentioned in the exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion No.30/2004-Central Excise the benefit of said Notification would not be available to them, and they are required to pay central excise duty on the finished goods. 4.6 We observe that demand has been confirmed against the Appellant without allowing the benefit of the duty already paid by them by treating PPMFY as excisable goods. The quantum demand confirmed needs to be worked out after making adjustment for the duty already paid. 4.7 Thus while upholding the demand made, we are remanding the matter to the Original Authority for re-computation of the demand after allowing the benefit of the duty already paid in respect of the PPMFY. 4.8 We note that during the period in dispute there was an order of the Commissioner confirming demand in respect of intermediary goods PPMFY. That order was subsequently set aside by the Final Order of the Tribunal dated 25.01.2018. Therefore, the penalty imposed on the Appellant by the impugned order cannot be sustained and is set aside. 5.1 Appeal is allowed. Penalty imposed under Section 11AC(1)(a) amounting to Rs.6,33,781/- is set aside. Matter is remanded for re-quantification of the demand of duty, giving credit of the duty already paid. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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