2013 (9) TMI 583 - AT - Central Excise

Tribunal dismisses appeal on duty payment facilities under Central Excise Rules

The Tribunal upheld the decision rejecting the appellants' application to avail facilities for duty payment under Rule 96ZNA of Central Excise Rules, ... Special procedure to be applied to the Independent Textile Processors. - Limit to the Investment of 3 crores - Eligibility for Benefit - Benefit of Payment of Duty - Appellants were engaged in the manufacture of Cotton Fabrics, Man Made Fabrics, Terry Towel, Terry Fabrics, etc. - Held that:- The interpretation of the Notification and Rules were correct and cannot be faulted that - the appellants had not been able to make out a case that they were eligible for the benefit based on annual production capacity in terms of Rule and Notification - The appellants did not have the heat setting and drying in the absence of chamber in the hot-air stenter installed by them and therefore they did not have the facility of heat setting and hence they were not eligible - The Circular supported the arguments that the production capacity and determination of duty in the Notification had been made on the basis of chambers in the hot air stenter and therefore the manufacturer who was having an open air stenter without chamber cannot be extended the benefit of the Notification - The Circular also clearly shows why the Government did not think it fit to issue a Notification fixing any production capacity in the case of an open air stenter - This would also show that if a manufacturer had an open air-stenter in addition to hot-air stenter the capacity of production of textile fabrics would definitely increase. The whole purpose of the explanations was to clear any doubts that for heat setting and drying one should exclusively use hot-air stenter only and though one may have open air stenters installed in the process house they cannot be used for heat setting or drying but may be used for other process - Explanations to the rules and the notifications cannot be read in isolation of its purpose - Rule 96ZNA(1) wherein an independent processor of textile fabrics, who was engaged exclusively in the manufacture or production of processed textile fabrics “with the aid of a hot-air stenter”, was eligible for the benefit under the scheme - The reference to “independent textile processor” according to him refers to a processor who was engaged exclusively in the production of fabrics with the aid of hot-air stenter and no one else - The order rejecting the application for availing the facilities for payment of duty under Rule 96ZNA of Central Excise Rules, 1944 was upheld – Decided against Assesses. Issues Involved:1. Whether the appellants' original investment in plant and machinery as on 1-5-2001 exceeded the limit of Rs. 3 Crores.2. Whether the benefit can be denied to the appellants on the ground that they have two open air stenters.Issue-Wise Detailed Analysis:1. Original Investment in Plant and Machinery:The first issue revolves around whether the appellants' original investment in plant and machinery exceeded the Rs. 3 Crores limit prescribed in the rule for availing the benefit of payment of duty on the basis of annual production capacity. The appellants argued that the Commissioner did not consider their application properly and relied on subsequent notifications not applicable at the time of their application. They submitted that their investment, as certified by a Chartered Accountant, did not exceed Rs. 3 Crores. The Commissioner, however, relied on the Deputy Commissioner's report, which stated the value as Rs. 3,09,63,727/-. The appellants contended that the Deputy Commissioner included taxes and duties in the valuation, which should be excluded as per AS-10 standards. Upon reviewing the discrepancies, the Tribunal found that the actual value of plant and machinery, after excluding consumables and correcting discrepancies, was Rs. 2,99,98,669/-, thus falling below the Rs. 3 Crores limit. Consequently, the benefit of duty payment on the basis of annual production capacity could not be denied on this ground.2. Presence of Open Air Stenters:The second issue concerns whether the presence of two open air stenters (one not in working condition) in the appellants' factory disqualifies them from availing the benefit. The relevant rules and notifications were examined, particularly Rule 96ZNA and the associated notifications. The appellants argued that having an open air stenter does not preclude them from the benefit, as long as heat setting and drying are done exclusively with a hot-air stenter. They cited explanations in the rules and a Tribunal decision in the case of Standard Niwar Mills to support their claim. However, the Tribunal noted that the rules and notifications specify that an independent textile processor must exclusively use a hot-air stenter for manufacturing to qualify for the benefit. The presence of an open air stenter, regardless of its use, disqualifies the processor from the benefit as it could potentially increase production capacity beyond what the notification accounts for. The Tribunal concluded that the appellants' interpretation of the rules and notifications was incorrect and upheld the Commissioner's order rejecting their application for availing the facilities for payment of duty under Rule 96ZNA.Conclusion:The Tribunal upheld the impugned order rejecting the application for availing the facilities for payment of duty under Rule 96ZNA of Central Excise Rules, 1944, and the appeal was rejected. The decision emphasized that the appellants did not meet the conditions specified in the rules and notifications, particularly concerning the exclusive use of hot-air stenters and the valuation of plant and machinery.