2002 (2) TMI 438 - AT - Central Excise

Tribunal rules against manufacturer in tax exemption case, citing burden of proof.

The Tribunal ruled in favor of the Revenue, finding that the goods manufactured by M/s. Jindal Spinning and General Mills were not eligible for exemption ... Exemption based on use of duty paid raw material Issues:1. Eligibility of goods manufactured by M/s. Jindal Spinning and General Mills for exemption under Notification No. 5/98-C.E.Analysis:1. The appeal filed by the Revenue questioned whether the goods produced by M/s. Jindal Spinning and General Mills qualified for exemption under Notification No. 5/98-C.E. The dispute arose from the Asstt. Commissioner disallowing the exemption claimed by the respondents due to the lack of proof that the single yarn used in manufacturing had duty paid. The Commissioner (Appeals) overturned this decision, relying on a Supreme Court case. The ld. SDR argued that the onus is on the manufacturer to demonstrate duty payment, citing relevant case law, including the decision in Jayesh Containers. Additionally, a recent Supreme Court judgment in the case of CCE, Vadodara v. Dhiren Chemical Industries emphasized the necessity for the correct excise duty payment to claim exemption.2. The ld. SDR contended that the condition in Notification 5/98 clearly stipulates that the benefit of exemption is contingent upon the appropriate duty payment on the raw material used. The Supreme Court's decision in Dhiren Chemical Industries was referenced to support this argument. The strict interpretation of exemption notifications, as highlighted in the case of Novopan India v. CCE, Hyderabad, was also emphasized to stress the importance of adherence to conditions for exemption eligibility.3. In response, the ld. Advocate for the respondents argued that the circumstances in the present case differed from the Dhiren Chemicals case as the raw material there was exempt from duty, unlike in the current scenario. Reference was made to the Supreme Court's decision in Decent Dyeing Company, which outlined the practical challenges faced by purchasers in verifying duty payment on goods. The explanation regarding treating all market stocks as duty paid was deemed inapplicable in the absence of duty exemption on the goods in question.4. The Tribunal analyzed the provisions of Notification No. 5/98 and the relevant case law, particularly the Supreme Court's interpretation in Dhiren Chemicals. It reiterated that the burden of proof lies with the manufacturer to establish that the raw material used has incurred the appropriate excise duty. Drawing parallels to previous cases like Jayesh Containers, where failure to prove duty payment led to dismissal of exemption claims, the Tribunal concluded that the respondents had not substantiated their compliance with the duty payment condition. Consequently, the impugned order was set aside, and the appeal filed by the Revenue was allowed. However, considering the circumstances, the imposition of penalties was revoked.