2017 (3) TMI 360 - AT - Central Excise

Manufacturers can claim exemption without duty proof, Tribunal rules in favor of respondent

CCE, Chandigarh Versus M/s Rainbow Denim Ltd.

The Tribunal upheld the respondent's entitlement to benefit under exemption Notification No. 14/2002-CE without the need for producing duty paying ... Benefit of N/N. 14/2002-CE dated 01.03.2002 - concessional rate of duty - Man made Processed Knitted Fabrics classifiable under Tariff sub Heading No. 6002.93 of Central Excise Tariff Act, 1985 - Held that: - similar issue came up before this Tribunal in the case of M/s Jarnail Government House [2016 (12) TMI 273 - CESTAT CHANDIGARH], where it was held that The appellant is not required to produce the evidence of payment of duty on Textile Fabrication - benefit of N/N. 14/2002-CE is available to the assessee - appeal dismissed - decided against Revenue. Issues:1. Interpretation of exemption Notification No. 14/2002-CE dated 01.03.2002.2. Entitlement to benefit under the exemption notification without producing duty paying documents.3. Application of legal fiction regarding payment of duty on textile fabrics.4. Precedent set by the Hon'ble Apex Court and previous Tribunal decisions on similar issues.Analysis:1. The case involved the interpretation of exemption Notification No. 14/2002-CE dated 01.03.2002, concerning the chargeability of duty on denim fabrics under specific conditions. The respondent was engaged in manufacturing cotton denim fabrics and availing cenvat credit facility for cotton yarn. The issue revolved around the conditions specified in the notification related to the fabrics made from textile yarn and the duty payable on such fabrics.2. The central question was whether the appellant was entitled to the benefit of the exemption under Notification No. 14/2002-CE without producing documents evidencing payment of duty on textile fabrics. The appellant argued that a legal fiction was created by the explanation to the exemption notifications, deeming textile yarn or fabrics to have been duty paid even without the production of duty paying documents. This interpretation was crucial in determining the eligibility for the exemption without the need for physical proof of duty payment.3. The application of the legal fiction regarding payment of duty on textile fabrics was a significant aspect of the case. The Tribunal referred to a relevant judgment by the Hon'ble Apex Court in the case of Sports & Leisure Apparel Ltd., which clarified that the explanation in the notification created a legal fiction. This legal fiction was intended to eliminate the requirement for manufacturers to produce documentary proof of duty payment, especially for those not availing MODVAT facility.4. The Tribunal relied on a previous decision in a similar case involving M/s Jarnail Dyeing House to establish a precedent. The Tribunal concluded that the issue had already been settled in favor of the respondent based on previous decisions and the interpretation provided by the Hon'ble Apex Court. As a result, the Tribunal dismissed the Revenue's appeal, citing the settled nature of the issue and the applicability of the legal fiction regarding duty payment on textile fabrics as per the exemption notification and relevant legal precedents.