2005 (9) TMI 208 - AT - Central Excise

Tribunal Annulls Order: Textile Rules Invalid, Changing Regulatory Framework Impacts Duty Liability and Abatement Claims.

RAJI THANGAM TEXTILES LTD. Versus COMMR. OF C. EX., COIMBATORE

The Tribunal annulled the Commissioner's order, allowing the appeal due to the legal invalidity of the Hot Air Stenter Independent Textile Processors ... Production capacity based duty - HELD THAT:- It is not in dispute that the ACD Rules have been struck down by the High Court in the case of Beauty Dyers [2001 (12) TMI 95 - HIGH COURT OF JUDICATURE AT MADRAS] as ultra vires the Central Excise Act. The Rules, therefore, should be held to have been suffering from the vice of illegality and unconstitutionality right from the day on which they were made. If that be so, the appellants cannot be held to have been lawfully working under Compounded Levy Scheme. It would follow that the determination of ACP by the Commissioner and the procedure laid down for matters such as determination of duty liability, collection of duty, abatement of duty, etc. were all futile exercises. It would suffice to say that the order of the ld. Commissioner is inconsequential. This is the scenario emerging from the judgment of the Hon'ble High Court and there is no escape from it, for the present. In the result, the impugned order is set aside and this appeal is allowed. Issues:1. Rejection of abatement claim by Commissioner of Central Excise.2. Applicability of the Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules, 1998.3. Dismantling of the stenter by the assessee.4. Legal validity of the ACD Rules.5. Appeal against the judgment of the High Court in the case of Beauty Dyers.6. Compounded Levy Scheme on independent textile processors.Issue 1: Rejection of Abatement ClaimThe appeal challenged the Commissioner's order rejecting the assessee's abatement claim for a specific period and directing them to pay duty based on the Annual Capacity of Production (ACP) determined under the ACD Rules, 1998. The Commissioner found that since the assessee dismantled their stenter without proper permission, any abatement of duty was not admissible.Issue 2: Applicability of ACD RulesThe ACD Rules, under which the ACP was determined, were challenged by the assessee citing a High Court judgment that struck down the rules as ultra vires the Central Excise Act. Consequently, the determination of ACP and related procedures were deemed illegal and futile, rendering the Commissioner's order inconsequential.Issue 3: Dismantling of the StenterThe assessee dismantled the stenter without obtaining prior permission from the Commissioner, as required by the rules. This action led to a dispute regarding the sealing of the stenter and the subsequent non-operation period, which formed the basis of the abatement claim rejection.Issue 4: Legal Validity of ACD RulesThe High Court's judgment declaring the ACD Rules as illegal and unconstitutional from their inception raised questions about the legality of the assessee's operation under the Compounded Levy Scheme. This rendered the ACD Rules ineffective, leading to the setting aside of the Commissioner's order.Issue 5: Appeal Against High Court JudgmentThe appeal referred to a pending appeal by the Department against a High Court judgment in the case of Beauty Dyers, indicating ongoing legal challenges regarding the applicability and legality of certain rules and schemes in the textile processing industry.Issue 6: Compounded Levy SchemeThe judgment highlighted that the Compounded Levy Scheme on independent textile processors was no longer in practice, further emphasizing the changing regulatory landscape in the industry.In conclusion, the Tribunal set aside the Commissioner's order, allowing the appeal based on the legal invalidity of the ACD Rules and the consequent ineffectiveness of the determination of duty liability, abatement claims, and related procedures.