2009 (11) TMI 440 - AT - Central Excise

Tribunal denies concessional rate of duty due to non-compliance with exemption conditions

The Tribunal held that the appellants were not eligible for the concessional rate of duty under Notification No. 6/2000-C.E. as they did not meet the ... Exemption- Cenvat Credit- the Appellant had availed of the exemption under Notification No. 6/2000-C.E. (S. Nos. 133 and 134), (the appellant stopped claiming the exemption under this notification w.e.f 10-6-2000), the Department was of the view that they are not eligible for the same, a SCN was issued for denying the exemption and demand of allegedly short paid duty amounting to Rs. 5,72,527/- and also for imposition of penalty under Rule 173Q(1). The Joint Commissioner confirmed the duty demand and also imposed penalty of Rs. 25000/- under Rule 173Q(1) on the ground that the exemption had been wrongly availed as duty credit under Rule 57Q had been availed in respect of dyeing machinery. On appeal, the Commissioner (Appeals) upheld the duty demand, but set aside the penalty. It is against this order of CCE (Appeals) that the present appeal has been filed. Held that- , the appellant was not eligible for concessional rate of duty in respect of dyed yarn under Notification No. 6/2000-C.E. (Sl. Nos. 133 and 134) and do not find any infirmity in the impugned order. Issues Involved:1. Eligibility for concessional rate of duty under Notification No. 6/2000-C.E.2. Interpretation of the conditions in Notification No. 6/2000-C.E. regarding the availing of Modvat credit.3. Impact of amendments in the Notification No. 6/2000-C.E. by Notification No. 29/2000-C.E.4. Entitlement to input and capital goods duty credit if the exemption is denied.Detailed Analysis:1. Eligibility for Concessional Rate of Duty under Notification No. 6/2000-C.E.:The appellants, who manufacture processed manmade fabrics and dyed yarn, took over a plant and machinery from M/s. Purvi Fabrics & Texturisers Pvt. Ltd. (M/s. Purvi). M/s. Purvi had availed capital goods Modvat credit under Rule 57Q of the Central Excise Rules, 1944, which was fully utilized before the takeover. The appellants claimed concessional rates of duty under Notification No. 6/2000-C.E. for dyed yarn but were denied the exemption by the Department, which led to the issuance of a Show Cause Notice (SCN) and subsequent confirmation of duty demand and penalty by the Joint Commissioner. The Commissioner (Appeals) upheld the duty demand but set aside the penalty, leading to the present appeal.2. Interpretation of the Conditions in Notification No. 6/2000-C.E. Regarding the Availing of Modvat Credit:The appellants argued that since they did not inherit or avail any capital goods duty credit from M/s. Purvi, they should be eligible for the exemption. They contended that the conditions for exemption were satisfied as no input or capital goods duty credit was availed by them. The Department, however, maintained that the exemption was not applicable because the previous owner had availed capital goods duty credit in respect of the dyeing machinery.3. Impact of Amendments in the Notification No. 6/2000-C.E. by Notification No. 29/2000-C.E.:The appellants contended that with effect from 1-4-2000, the conditions for exemption changed to 'no credit under Rule 57AB or 57AK' instead of 'Rule 57A or 57B or 57Q.' They argued that since M/s. Purvi had availed credit under Rule 57Q, not under Rule 57AB or 57AK, they should be eligible for the exemption from 1-4-2000. The Department countered this by stating that the essence of the conditions remained the same despite the renumbering of the rules, and the spirit behind the exemption conditions was that no input or capital goods duty credit should have been availed in the dyeing process.4. Entitlement to Input and Capital Goods Duty Credit if the Exemption is Denied:The appellants also argued that if the exemption is denied, they should be entitled to input and capital goods duty credit for the period from 1-3-2000 to 9-6-2000, which they had not taken. They cited several judgments to support this claim.Judgment Analysis:The Tribunal held that the appellants were not eligible for the concessional rate of duty during the period from 1-3-2000 to 9-6-2000 under Notification No. 6/2000-C.E. (Sl. Nos. 133 and 134). The Tribunal emphasized that the conditions for exemption required that no credit under Rule 57A, 57B, or 57Q should have been availed in the process of dyeing, printing, bleaching, or mercerizing. Since M/s. Purvi had availed and utilized capital goods duty credit under Rule 57Q in respect of the dyeing machinery, the appellants did not satisfy the conditions for exemption. The Tribunal also clarified that the amendments brought by Notification No. 29/2000-C.E. did not change the essence of the conditions, and the renumbered rules (57AB and 57AK) were essentially the same as the old rules (57A, 57B, and 57Q). Thus, the appellants' plea that they should be eligible for exemption from 1-4-2000 was not accepted. Consequently, the appeal was dismissed, and the impugned order was upheld.