2013 (9) TMI 494 - AT - Central Excise

Tribunal rules on duty demands, penalties, waste duty, and notification interpretation

The Tribunal rejected the Revenue's appeals on the grounds of time-bar and limitation for demand of duty prior to 1-7-2001, upheld the setting aside of ... Benefit of Notification No. 47/94 and Notification No. 43/2001 - Manufacture of Textiles and Made-up Articles - Assesses were operating under Rule 13(1)(b) of Central Excise Rules, 1944/Rule 19 of Central Excise Rules, 2001 and they were manufacturing made-up articles - Appellants were job workers and were operating under Rule 13(1)(b) of the Central Excise Rules, 1944 upto 30-6-2001 and thereafter under Rule 19 of Central Excise Rules, 2001 and 2002 - they were holding Central Excise registration for manufacture of textiles and made-up articles falling under Chapter 63 of Central Excise Tariff Act, 1985 - Revenue demanded duty leviable on fabrics on the quantity of fents, rags and chindies in excess of percentage proved by the department - whereas job workers claimed that they had discharged the duty liability as leviable on fents, rags and chindies - Held that:- The duty on the waste generated in form of fents, rags and chindies was payable by M/s. SGP and GTC in terms of these Notifications No. 47/94 and 43/2001 only After going through the Notification No. 47/94 and Notification No. 43/2001 – the notifications had been issued under Rule 13 of Central Excise Rules, 1944 and Rule 19 of Central Excise Rules, 2001 respectively for receiving the goods without payment of duty for manufacture of export goods. These notifications contain many conditions to be fulfilled by the manufacturer or processor - There was a specific provision in these notifications for the waste generated during the processing/manufacture of the export goods - Dutiablity of waste will be governed by the specific provisions under notification - If the duty was demanded on waste as applicable to fabrics under Chapter X procedure or Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001, then provisions relating to the waste under these notifications will become redundant - As regards the execution of bond, movement of goods under AR-3 procedure, maintenance of account of goods received, submission of quarterly RT-11 return etc., the manufacturer was required to follow the Chapter X procedure or procedure under the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 – Appeal filed by the Assesses was allowed – Decided in favour of Assessees. The Commissioner (Appeals) had allowed the appeals of M/s. SGP and GTC holding that as the procedures prescribed under Notification No. 47/94 (para 5(a) and Notification No. 43/2001) were followed by the manufacturer/processor - the duty under Rule 6 of the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 was not recoverable and there was no suppression of the facts as returns were filed by them regularly with the department - We do not find any infirmity in these findings of the Commissioner (Appeals) - the Orders-in-Appeal was upheld and Revenue’s appeals were rejected. Issues Involved:1. Time-bar and limitation for demand of duty.2. Imposition of penalty under Section 11AC.3. Applicability of duty on waste generated during manufacturing.4. Compliance with Notifications No. 47/94 and 43/2001.5. Consistency in interpretation of notifications by Commissioner (Appeals).Detailed Analysis:1. Time-bar and Limitation for Demand of Duty:The Revenue filed appeals against the dropping of demands by the Commissioner (Appeals) on the ground of time-bar for the period prior to 1-7-2001. The Commissioner (Appeals) had held that the demands were hit by time-bar as M/s. Shetty Garments Pvt. Ltd. (SGP) and M/s. Gupta Trading Co. (GTC) had kept the department informed about their clearances through RT-12 returns and price declarations of the waste fabrics. The Tribunal did not find any infirmity in these findings and rejected the Revenue's appeals on the ground of limitation.2. Imposition of Penalty under Section 11AC:The Commissioner (Appeals) had set aside the penalties imposed on M/s. BDMC under Section 11AC. The Revenue challenged this decision, but the Tribunal upheld the Commissioner (Appeals)'s findings, noting that the penalties were not justified as the duty on fents, rags, and chindies had already been paid by the processor/manufacturer.3. Applicability of Duty on Waste Generated During Manufacturing:The core issue was whether duty should be levied on the waste (fents, rags, and chindies) generated during the manufacturing of made-up articles for export. The Revenue contended that since the fabrics were received without payment of duty, the duty should be recoverable under Rule 196 of Chapter X Procedures and Rule 6 of Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. However, the Tribunal found that the duty on waste should be governed by the specific provisions under Notifications No. 47/94 and 43/2001, which allowed payment of duty as applicable to waste and not as fresh fabrics.4. Compliance with Notifications No. 47/94 and 43/2001:The Tribunal noted that both Notifications No. 47/94 and 43/2001 had specific provisions for the waste generated during the processing of excisable goods. These provisions allowed the removal of waste on payment of duty as if such waste is manufactured in the factory of the manufacturer. The Tribunal held that M/s. SGP and GTC had followed the procedures prescribed under these notifications, and the duty on waste had been paid as per the notifications. Therefore, the duty under Rule 6 of the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 was not recoverable.5. Consistency in Interpretation of Notifications by Commissioner (Appeals):The Tribunal found inconsistency in the interpretation of Notification No. 43/2001 by the Commissioner (Appeals). In some orders, the Commissioner (Appeals) allowed the appeals on merit, while in others, he confirmed the demand on the manufacturer. The Tribunal pointed out that the same Commissioner (Appeals) had taken different stands in different orders, which was not consistent. The Tribunal set aside the Order-in-Appeal No. BR(466-467)124-125/MV/2005, dated 5-9-2005, as the subsequent show cause notice could not be issued invoking the extended period when an earlier show cause notice on the same ground had already been issued.Conclusion:The Tribunal rejected the appeals filed by the Revenue and allowed the appeals filed by M/s. SGP, M/s. GTC, and Shri Mukesh Gupta. The cross-objections filed by the respondents were also disposed of. The Tribunal's decision was based on the proper interpretation and application of the relevant notifications and procedural compliance by the appellants.