2018 (4) TMI 1149 - AT - Central Excise

Tribunal grants relief by setting aside duty demand post Notification No. 217/86-CE

M/s. Sri Rama Poly Bags Versus Commissioner of Central Excise, Tirunelveli

The Tribunal allowed the appeal partially, granting relief to the appellant by setting aside the duty demand imposed by the department post the ... Valuation - captive consumption - N/N. 217/86-CE dated 2.4.1986 - Held that: - The description of inputs as well as final products in the above notification shows that the exemption would be eligible for inputs falling under Chapter 39 even if the finished products also fall under Chapter 39 - in the case of Narmada Plastics P. Ltd. Vs. Commissioner of Central Excise, Raipur [2000 (5) TMI 527 - CEGAT, NEW DELHI] in which the benefit of exemption was given to the captively consumed HDPE tapes under Notification No. 217/86. The appellant is eligible for the benefit of N/N. 217/86 - The demand of duty after 2.4.1986 cannot sustain and requires to be set aside - appeal allowed in part. ISSUES PRESENTED AND CONSIDERED 1. Whether captively consumed HDPE tapes (goods classifiable under Chapter 39) are eligible for exemption where the finished products fall under Chapter 39 rather than under heading 5406, in view of Notification No.221/86-CE dated 2.4.1986. 2. Whether Notification No.217/86-CE dated 2.4.1986 permits exemption of inputs classifiable under Chapter 39 when the final products also fall under Chapter 39, and if so, whether that notification displaces the limiting construction of Notification No.221/86 for the period on and after 2.4.1986. 3. Whether an assessee who did not claim exemption under a particular notification at the initial stage is precluded from claiming the benefit at a later stage where the later notification/position affords greater relief. 4. Extent of liability (if any) prior to 2.4.1986 when Notification No.217/86 came into effect. ISSUE-WISE DETAILED ANALYSIS Issue 1: Applicability of Notification No.221/86 to captively consumed HDPE tapes where finished product does not fall under 5406 Legal framework: Notification No.221/86 lists inputs (column (3)) and requires the finished products to be classifiable under specified headings (column (5)) - for strips of plastics (39.20) the corresponding finished-product entry is 5406.90 (strips and the like of synthetic textile material). Interpretation and reasoning: The Tribunal construed the text of Notification No.221/86 strictly - where the finished product is not classifiable under 5406, the exemption under that specific entry cannot be claimed for inputs falling under 39.20. The original authority's denial of exemption under Notification No.221/86 for finished products classifiable under Chapter 39 (3923) is therefore legally sustainable. Precedent treatment: No precedent was relied upon to broaden the scope of Notification No.221/86; the Tribunal applied the notification's express pairing of input-heading to final-product heading. Ratio vs. Obiter: Ratio - a notification that ties a specific input entry to a specified finished-product heading (5406) cannot be read to cover finished products outside that heading. Conclusion: Notification No.221/86 did not entitle the captively consumed HDPE tapes to exemption where the finished products were classifiable outside 5406. Issue 2: Applicability of Notification No.217/86 to inputs and finished products both classifiable under Chapter 39 Legal framework: Notification No.217/86 provides exemption entries where both inputs and final products are described broadly as goods classifiable under specified chapters (including Chapter 39) without restricting the final products to heading 5406. Interpretation and reasoning: The Tribunal examined the language of Notification No.217/86 and found it unambiguously covers inputs falling under Chapter 39 where the finished products are also classifiable under Chapter 39. The absence of a heading-specific restriction (unlike Notification No.221/86) means the exemption applies to the appellant's captively consumed HDPE tapes used to make finished goods under Chapter 39. Precedent treatment: The Tribunal followed a prior tribunal decision that granted the benefit of Notification No.217/86 to captively consumed HDPE tapes used in the manufacture of goods under Chapter 39. That authority, together with the Supreme Court principle relied on by the appellant (that an assessee may claim a more beneficial notification at a later stage), informed the Tribunal's approach. Ratio vs. Obiter: Ratio - where a later notification expressly covers inputs and final products within the same chapter (here, Chapter 39), the exemption under that notification is available notwithstanding the narrower scope of an earlier notification. Conclusion: Notification No.217/86 applies to the captively consumed HDPE tapes for finished products falling under Chapter 39; therefore duty demands founded on denial of that notification for the period on and after 2.4.1986 cannot be sustained. Issue 3: Whether the assessee's failure to claim the benefit initially estops subsequent claim Legal framework: Principle permitting claim of beneficial statutory/exemptive provisions even if not initially invoked, where law permits and the entitlement exists. Interpretation and reasoning: The Tribunal accepted the legal proposition that an assessee is not estopped from claiming a beneficial exemption at a later stage if the assessee was entitled to it; oversight in initial claim does not preclude later invocation of a more beneficial notification, subject to prescribed conditions and relevant limitation rules. Precedent treatment: The Tribunal relied on the reasoning of a higher authority supporting the proposition that entitlement to a beneficial notification can be asserted after the fact and followed a tribunal decision applying Notification No.217/86 to materially similar facts. Ratio vs. Obiter: Ratio - an assessee entitled to exemption under a notification that offers greater relief is not barred from claiming that benefit later merely because it was not claimed at the initial stage. Conclusion: The appellant's initial non-claim of Notification No.217/86 did not estop it from later obtaining the benefit once entitlement was established. Issue 4: Temporal extent of liability prior to 2.4.1986 Legal framework and interpretation: Notification No.217/86 came into effect on 2.4.1986; therefore exemptions thereunder operate only from that date forward. Any period before the notification's commencement must be judged against the law and notifications in force for that earlier period. Reasoning: The appellant conceded that Notification No.217/86 was not in existence before 2.4.1986 and accepted liability for a short period of 32 days prior to 2.4.1986. The Tribunal accepted that concession and limited the disallowance of the department's demand to the pre-notification period. Ratio vs. Obiter: Ratio - temporal operation of a notification governs entitlement; a notification cannot be given retrospective effect to a period before its commencement unless it itself so provides. Conclusion: The duty demand for the period on and after 2.4.1986 is set aside; liability remains confined to the period prior to 2.4.1986 (32 days), as conceded by the appellant. Operative Conclusion of the Tribunal The Tribunal modified the impugned order by setting aside the duty demand for the period on and after 2.4.1986, allowing the appeal in part with consequential relief, while maintaining liability (as conceded) for the short period prior to 2.4.1986. The Tribunal followed and applied the precedent recognizing late invocation of a more beneficial notification and the tribunal authority applying Notification No.217/86 to similar inputs and outputs.