2015 (11) TMI 556 - AT - Central Excise

CESTAT Chennai: Textile Manufacturers Win Appeal on Duty-Free Yarn Procurement

Jarmaaks Soft Tex (P) Ltd. Versus Commissioner of Central Excise, Madurai

The Appellate Tribunal CESTAT CHENNAI allowed the appeal of textile manufacturers regarding duty-free procurement of yarn under Notification No.43/2001. ... Procurement of inputs free of duty for use in manufacturing of export goods - export procedure not followed - Duty demand in terms of Notification No.43/2001 CE (NT) dt.26.6.2001 - Held that:- L.A.A in the impugned order at para-25 admitted the fact that terry toweling fabrics supplied to the EOU have been exported after undertaking further processing into garments and also they have submitted proof of export. In the present case, appellant has supplied terry towel fabrics to another EOU for further processing. The only condition in the notification is that appellant has to produce proof of export of the final product. In the present case, as the LAA has clearly brought out that there is no dispute that the goods have been cleared to EOU and appellants have produced proof of export through EOU - Decision in the case of Jansons Clothing Vs CCE Salem [2015 (10) TMI 1120 - CESTAT CHENNAI] followed - Decided in favour of assessee. Issues: Interpretation of Notification No.43/2001 for duty-free procurement of yarn, whether supplies to EOU constitute export, applicability of circulars and precedent judgments.In the judgment by Appellate Tribunal CESTAT CHENNAI, the appellants, textile product manufacturers under Chapter Sub-heading 6307.90, procured cotton yarn duty-free under Notification No.43/2001 for fulfilling export obligations. The adjudicating authority initially dropped proceedings, but the Revenue appealed to the Commissioner (Appeals) who confirmed a demand of Rs. 1,19,679. The appellant argued that supplying terry towel fabrics to an EOU, which exported the final products, fulfilled the export obligation. The appellant cited a Tribunal decision in a similar case to support their claim. The Revenue contended that supplies to EOU did not constitute export, referencing relevant circulars and precedent judgments.Upon review, the Tribunal noted that the terry towel fabrics supplied to the EOU were further processed into garments and exported, with proof of export submitted. The Tribunal emphasized that the notification required proof of export of the final product, not necessarily by the appellant themselves. Citing a previous decision, the Tribunal concluded that the spirit of the notification was to export goods manufactured using duty-free raw materials, regardless of the entity exporting them. Therefore, the Tribunal allowed the appellant's appeal, setting aside the impugned order and dismissing the Revenue's appeal without imposing a penalty. The decision aligned with previous Tribunal rulings and established a consistent interpretation of the notification in question.