2013 (8) TMI 571 - AT - Central Excise

Appellant granted exemption under Notification 14/2002-CE, duty demand and penalties set aside.

SUDITI INDUSTRIES LTD Versus COMMISSIONER OF CENTRAL EXCISE, BELAPUR

The Tribunal held that the appellant was entitled to the exemption under Notification 14/2002-CE at Sr. Nos. 10 and 12 as they met the conditions. ... Benefit of exemption under Notification 14/2002 - unprocessed cotton knitted fabrics - , the exemption under Notification 14/2002 at Sr.no.12 was denied to the appellant on the premise that the input (unprocessed knitted fabric) cleared from the Mahape unit have been received by Pawane unit without payment of duty as the appellant has availed exemption under Notification 14/2002 - Held that:- The Commissioner had misdirected to apply the higher rate of duty in the case of the assesses whereas the concessional rate under Notification No. 14/2002-C.E. had been allowed in respect of other units similarly situated - SIMPLEX MILLS CO. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI [2005 (4) TMI 406 - CESTAT, MUMBAI]. Contention of the revenue that Notification 14/2002 the Mahape unit of the assesse had cleared the goods after satisfying the condition no. 1 i.e. in availing CENVAT credit on inputs/capital goods could not be accepted. As per Notification 14/2002 the Mahape unit of the appellant has cleared the goods after satisfying the condition no. 1 i.e. in availing CENVAT credit on inputs/capital goods. Therefore, goods were cleared without payment of duty at Sr.no.10 of Notification 14/2002. These goods were received by their Pawane unit and the same were deemed to be duty paid as no credit on inputs/capital goods have been availed by their Mahape unit. - order set aside. - Decided in favor of assessee. Issues Involved:1. Denial of exemption under Notification 14/2002-CE at Sr. No. 12.2. Applicability of penalties under Rule 25 of Central Excise Rules, 2002.3. Interpretation of conditions under Notification 14/2002-CE.4. Relevance of CBEC Circulars and clarifications.5. Applicability of the Supreme Court decision in Dhiren Chemical Industries.Issue-Wise Detailed Analysis:1. Denial of Exemption under Notification 14/2002-CE at Sr. No. 12:The core issue was whether the appellant was entitled to claim exemption under Sr. No. 12 of Notification 14/2002-CE. The appellant contended that they had satisfied the conditions stipulated in the notification, specifically that no CENVAT credit was taken on inputs or capital goods. The Tribunal found that the Mahape unit cleared goods under Sr. No. 10 of the notification without availing CENVAT credit, and these goods were then processed and cleared by the Pawane unit under Sr. No. 12. The Tribunal agreed with the appellant that the goods were deemed duty paid as per Explanation II of the notification, thus entitling them to the exemption.2. Applicability of Penalties under Rule 25 of Central Excise Rules, 2002:Given the Tribunal's finding that the appellant was entitled to the exemption under Notification 14/2002-CE, the penalties imposed under Rule 25 of the Central Excise Rules, 2002, were set aside. The Tribunal did not delve deeply into this issue since the primary contention regarding the exemption was resolved in favor of the appellant.3. Interpretation of Conditions under Notification 14/2002-CE:The Tribunal examined the conditions under Notification 14/2002-CE, particularly conditions No. 1 and 3, which required that the appropriate duty of excise be paid on the inputs or capital goods. The Tribunal noted that the expression 'on which appropriate duty of excise leviable... read with any notification for the time being in force... has been paid' was critical. The Tribunal found that the appellant had complied with these conditions, as the goods were deemed duty paid under Explanation II of the notification.4. Relevance of CBEC Circulars and Clarifications:The Tribunal referred to various CBEC circulars, including Circular No. 667/58/2002-CX and Circular No. 680/71/2002-CX, which clarified the applicability of the notification. The Tribunal found that these circulars supported the appellant's contention that the goods were deemed duty paid and that the exemption under Notification 14/2002-CE was available. The Tribunal also noted that these circulars were issued to maintain uniformity in the application of the exemption.5. Applicability of the Supreme Court Decision in Dhiren Chemical Industries:The respondent argued that the Supreme Court decision in Dhiren Chemical Industries was applicable, which held that exemption notifications requiring 'appropriate duty' to be paid would not apply if the inputs were exempt or subject to nil duty. However, the Tribunal distinguished this case, noting that the conditions in Notification 14/2002-CE included the phrase 'read with any notification for the time being in force,' which was not present in the Dhiren Chemical Industries case. Thus, the Tribunal concluded that the ratio of the Dhiren Chemical Industries decision did not apply to the present case.Conclusion:The Tribunal concluded that the appellant was entitled to the exemption under Notification 14/2002-CE at Sr. Nos. 10 and 12, as they had satisfied the conditions stipulated in the notification. Consequently, the demand for duty and the penalties imposed were set aside, and the appeal was allowed with consequential relief.