2018 (12) TMI 543 - AT - Central Excise

Tribunal grants exemption under Notification No. 14/2002-CE for input fabrics, citing no Cenvat credit taken.

M/s Nachmo Knitex Limited, Ananthan Vaitheeswaran Versus C.C.E. Ahmedabad-i

The Tribunal allowed the appeals, holding that the exemption under Notification No. 14/2002-CE was available to the appellant as no Cenvat credit was ... Clearance of processed knitted cotton fabrics - N/N. 14/2002-CE dated 01.03.2002 (serial No. 12) - case of Department is that appellant is not fulfilling the condition no. 3 of the said Notification inasmuch as the unprocessed cotton fabrics used in the manufacture of processed knitted cotton fabric is clearly exempted and no duty was paid consequently - Held that:- The issue is no longer under dispute as under the same set of facts and the issue on merit it has been decided by the Larger Bench in the case of Arvind Products Ltd. [2014 (11) TMI 79 - CESTAT AHMEDABAD], where it was held that the only condition to be fulfilled is the assesse should not take cenvat credit that will be sufficient for allowing the exemption Notification No. 14/2002-CE. Benefit is to be extended to appellant - appeal allowed - decided in favor of appellant. Issues Involved:1. Eligibility of exemption under Notification No. 14/2002-CE for processed knitted cotton fabrics.2. Interpretation of Condition No. 3 and Explanation-II of Notification No. 14/2002-CE.3. Application of the Larger Bench judgment in the case of Arvind Products Ltd. vs CCE & ST Ahmedabad.4. Retrospective nature of Notification No. 3/2003-CE.Issue-wise Detailed Analysis:1. Eligibility of exemption under Notification No. 14/2002-CE for processed knitted cotton fabrics:The appellant manufactured and cleared processed knitted cotton fabrics and claimed exemption under Notification No. 14/2002-CE (serial No. 12). The department contended that the appellant used unprocessed knitted fabrics, which were exempted from duty under Serial No. 10 of the same notification, thus not fulfilling Condition No. 3 of the exemption. The adjudicating authority confirmed the demand and imposed a penalty, leading to the appeal.2. Interpretation of Condition No. 3 and Explanation-II of Notification No. 14/2002-CE:Condition No. 3 requires that the appropriate duty of excise on the input fabrics must be paid, and no Cenvat credit should be taken. Explanation-II deems textile yarns or fabrics to be duty paid even without production of documents evidencing payment of duty. The Larger Bench in Arvind Products Ltd. interpreted this to mean that the exemption is available if no Cenvat credit is taken, regardless of whether the input fabrics were duty-paid.3. Application of the Larger Bench judgment in the case of Arvind Products Ltd. vs CCE & ST Ahmedabad:The Larger Bench judgment, upheld by the Supreme Court, clarified that the exemption under Notification No. 14/2002-CE is admissible if no Cenvat credit is taken, and the input fabrics are deemed duty paid as per Explanation-II. The Tribunal noted that the department could not counter this settled position of law. The Tribunal concluded that the exemption is available to the appellant, as the input fabrics are deemed duty paid under Explanation-II, and no Cenvat credit was taken.4. Retrospective nature of Notification No. 3/2003-CE:The Tribunal observed that Notification No. 3/2003-CE, which amended Notification No. 14/2002-CE, did not contain a clause indicating retrospective application. Therefore, it could not be considered curative and retrospective in operation. The Tribunal emphasized that legislative intent, as clarified in the Explanatory Notes of Budget Bulletin 2002, was to extend the exemption benefit without insisting on documentary proof of duty payment, provided no Cenvat credit was taken.Conclusion:The Tribunal set aside the impugned order and allowed the appeals, following the settled position of law established in the Larger Bench judgment of Arvind Products Ltd. The operative portion of the order was pronounced in the open court.