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of <h1>Tribunal Seeks Clarity on Duty Exemption for Fabrics</h1> <h3>SHANTI PROCESSORS LTD. Versus COMMISSIONER OF C. EX., AHMEDABAD</h3> The Tribunal referred a case involving the interpretation of Notification No. 14/2002-C.E. for exemption on knitted or crocheted fabrics to a Larger Bench ... Benefit of Notification No. 14/2002-C.E - The issue was regarding exemption to product falling under Sr. No. 12 of the notification - Interpretation of Explanation II which is read as, Explanation II : For the purposes of the conditions specified below, textile yarns or fabrics shall be deemed to have been paid even without production of documents evidencing payment of duty thereon - Held that:- there is definitely inherent contradiction in the findings recorded by Tribunal in the case of Prem Industries [2009 (5) TMI 193 - CESTAT, NEW DELHI] and Auro Textile [2009 (11) TMI 447 - CESTAT, NEW DELHI] The issue regarding benefit of Notification No. 14/2002 as regards condition “on which duty hads been paid” needs to be settled by Larger Bench - Simplex Mills Co. Ltd. and Morarjee Gokuldas Spg. & Wvg. Co. Ltd [2005 (5) TMI 170 - CESTAT, MUMBAI] - the benefit of Notification No. 14/2002 was extended to the assessee - Following Jayaswals Neco Ltd. v. CCE, Nagpur [2006 (1) TMI 133 - SUPREME COURT OF INDIA] - Tribunal directed the Registry to place the order before Hon’ble President to consider constituting a Larger Bench and to answer reference as to whether the judgment and order delivered by Bench in the case of Prem Industries is correct or judgment delivered by the Bench in the case of Auro Textile is correct as regards the benefit of Notification No. 14/2002. Issues:- Benefit of Notification No. 14/2002-C.E. regarding exemption to knitted or crocheted fabrics- Interpretation of the provision 'on which duty has been paid'- Conflict in decisions of various Tribunal casesAnalysis:- The issue in these cases pertains to the benefit of Notification No. 14/2002-C.E., specifically exemption for products falling under Sr. No. 12 of the notification. The appellant argues that knitted or crocheted fabrics should be eligible for the benefit of Explanation II of the notification, which deems textile yarns or fabrics to have been duty paid even without producing documents evidencing payment of duty. The appellant relies on previous Tribunal decisions to support their claim that the benefit should not be denied based on duty payment status of the supplier (CCE, Ludhiana v. Prem Industries). However, the respondent argues that subsequent cases have interpreted the provision differently, emphasizing actual discharge of duty as necessary for claiming the benefit (Auro Textile v. CCE, Chandigarh). This conflicting interpretation has led to a debate on the correct application of the notification.- The Tribunal examined the precedents, including the case of Prem Industries, where a similar issue was addressed. In Prem Industries, the Tribunal upheld the benefit of the notification for processed knitted fabrics made from unprocessed fabrics purchased from the market, deeming them duty paid under Explanation II. However, in the case of Auro Textile, a different approach was taken, suggesting that the decision in Prem Industries was not applicable to the current cases due to specific circumstances and lack of raised arguments. The Tribunal noted an inherent contradiction in the findings of different cases and concluded that a Larger Bench should resolve the interpretation of the condition 'on which duty has been paid' in Notification No. 14/2002.- In light of the conflicting interpretations and the principle of following decisions of the same strength, the Tribunal decided to refer the matter to the Hon'ble President for constituting a Larger Bench. Citing the precedent set by the Supreme Court in Jayaswals Neco Ltd. v. CCE, Nagpur, the Tribunal directed the Registry to present the order along with relevant case decisions for consideration. The objective is to seek clarification on whether the judgment in Prem Industries or Auro Textile correctly applies the benefit of Notification No. 14/2002-C.E. This step aims to address the inconsistency in Tribunal decisions and provide clarity on the interpretation of the notification provision.
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