Appeal allowed, recovery order set aside under Central Excise Act. Time-barred demand, no intent to evade duty. /2002-CE

The Tribunal allowed the appeal by M/s Shree Rishabh Polyester, setting aside the recovery order and penalty imposed under the Central Excise Act. It ruled that the conditions of Notification No. 6/2002-CE were met, the demand was time-barred, and there was no intent to evade duty. The appeal was allowed with consequential relief to the appellants.

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Issues Involved:

1. Applicability of Notification No. 6/2002-CE dated 1st March 2002.
2. Compliance with conditions of the notification.
3. Demand of duty and imposition of penalty.
4. Limitation period for raising demand.

Summary:

1. Applicability of Notification No. 6/2002-CE dated 1st March 2002:
M/s Shree Rishabh Polyester challenged the recovery order of Rs. 1,41,391 under section 11A of the Central Excise Act, 1944, along with interest under section 11AB, and a penalty of Rs. 5000 under rule 27 of the Central Excise Rules, 2002. The dispute arose due to the claimed benefit of Notification No. 6/2002-CE, which restricted liability to Rs. 9 per kg as CENVAT and additional excise duty to 15% on dyed yarn, instead of higher rates for other duties.

2. Compliance with Conditions of the Notification:
The appellant argued that the circumstances of their case were identical to those in the case of M/s Shreekar Polyester Pvt Ltd, where the Tribunal had previously ruled in favor of the appellant. The notification required the finished goods to be manufactured from duty-paid textured or draw-twisted yarn without availing CENVAT credit in the dyeing process. The appellant contended that they complied with these conditions as the dyed yarn was manufactured from duty-paid textured yarn, despite the intermediate stage of twisted yarn.

3. Demand of Duty and Imposition of Penalty:
The Revenue argued that the finished goods were not manufactured from duty-paid textured yarn but from twisted yarn, which did not comply with the notification's conditions. However, the Tribunal found that the principle within the central excise scheme intended to tax all manufacture stages but allowed for exclusions if duty was paid at some stage. The Tribunal concluded that the finished goods were manufactured from duty-paid textured yarn and that the intermediate twisted yarn did not alter the duty-paid status of the principal yarn.

4. Limitation Period for Raising Demand:
The Tribunal also noted that the demand was barred by limitation, as it was raised beyond the normal period of one year. The appellant had made declarations to the department and recorded entries in statutory records, which did not constitute suppression or misstatement with intent to evade duty. Therefore, the longer period of limitation could not be invoked.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order, and ruled that the conditions of the notification were met, the demand was barred by limitation, and there was no suppression or misstatement by the appellant. The appeal was allowed with consequential relief to the appellants. The order was pronounced in the open court on 05/09/2023.

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