2005 (5) TMI 430 - AT - Central Excise

Tribunal Rules in Favor of Duty Exemption on Exported Goods

The Tribunal held that duty was not demandable based on the interpretation of a Section 11C Notification exempting duty payment on cotton yarn for ... Exemption - Yarn Issues:- Interpretation of Section 11C Notification exempting duty payment on cotton yarn for further processing.- Applicability of Rule 96E under Central Excise Rules, 2001.- Claiming benefit under Rule 19(2) of CE Rules for exported goods.- Revenue neutrality argument based on relevant case law.Interpretation of Section 11C Notification:The case involved appeals arising from OIOs confirming demands related to the manufacture of Cotton Yarn under specific Chapter Headings. The appellants cleared a portion of the yarn for further processing without duty payment, relying on Rule 96E of the erstwhile CE Rules. The new Central Excise Rules, 2001 did not contain a similar provision, leading to disputes. The appellants contended that a subsequent Section 11C Notification exempted duty payment on cotton yarn removed for processing during a specific period. The Tribunal analyzed the Notification, which acknowledged a prevalent practice of non-levy of excise duty on such yarn during a defined period. Consequently, the Tribunal held that duty was not demandable in the present case based on the Notification's provisions.Applicability of Rule 96E and Rule 19(2):The appellants argued that Rule 96E continued in the Central Excise Rules, 2001, supporting their claim for duty exemption. They also invoked Rule 19(2) of CE Rules concerning exported goods, citing relevant case law to bolster their position. The Tribunal considered these arguments and found merit in the appellants' contentions. Notably, the Tribunal acknowledged the applicability of Rule 96E and the provisions of Rule 19(2) in the context of exported goods, ultimately supporting the appellants' stance on these grounds.Revenue Neutrality Argument:The appellants further contended that the entire demand was revenue neutral, referencing various judgments to support their claim. They relied on case law to establish the revenue-neutral nature of the transactions in question. The Tribunal examined these arguments and found them persuasive, leading to the conclusion that the demands were revenue neutral. Consequently, the Tribunal set aside the impugned order and allowed the appeals with any consequential relief deemed appropriate.In conclusion, the Tribunal's detailed analysis of the issues surrounding the interpretation of the Section 11C Notification, the applicability of relevant rules, and the revenue neutrality argument resulted in a favorable outcome for the appellants, with the demands being deemed not enforceable.