TaxTMI 
TaxTMI 
TaxTMI 
2010 (4) TMI 676
X X X X Extracts X X X X
X X X X Extracts X X X X
....and blended yarn and grey fabrics of cotton/blended yarn under Notification No. 22/96-C.E., dated 23-7-96. The dispute in this case is about the rate of duty on the processed cotton fabrics cleared during the period from October 2002 to February 2003. During the period of dispute, the tariff rate of duty on the woven processed cotton or blended fabric was 24% [16% basic excise duty plus 8% AED (GSI)]. However, exemption Notification No. 14/02-C.E., dated 1-3-02 issued under Section 5A(1) of the Central Excise Act, 1944 (Serial No. 4 of the table annexed to the notification) prescribe concessional rate of 12% in respect of woven fabrics of cotton or blended yarn, subjected to any process. However, this concessional rate of duty was subject to condition that processed fabrics are made from textile fabrics, whether or not processed, on which appropriate duty of excise leviable under the first schedule to the Central Excise Tariff Act and Additional Duties of Excise (Goods of Special Importance) Act [AED (GSI)], read with any notification for the time being in force or the additional duty of customs leviable under Section 3 of the Customs Tariff Act, 1975, as the case may be, has been ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he grey fabric and since view of the Hon'ble Supreme Court's judgment in the case of CCE, Vadodara v. Dhiren Chemical Industries reported 2002 (139) E.L.T. 3 (S.C.), the goods in respect of which full duty of exemption have been availed, cannot be said to be the goods on which the appropriate of duty of excise has already been paid, the condition for concessional rate of duty in respect of processed fabrics, as prescribed in the exemption Notification No. 14/02-C.E., is not satisfied and accordingly the appellant would be liable to pay duty at the tariff rate of 24% ad valorem (16%) of basic excise duty plus 8% AED (GSI). It is on this basis that a show cause notice dated 30-10-03 was issued for demand of differential duty amounting to Rs. 1,59,57,588/- on clearances of 54,12,479.41 mtrs. of processed cotton fabrics valued at Rs. 13,29,79,628/- by the appellant during the period from October 2002 to February 2003, alongwith interest on this duty at the applicable rate as per the provisions of Section 11AB of the Central Excise Act, 1944 and also for imposition of penalty on them under Rule 25(1) of Central Excise Rules, 2002 for contravention of the provisions of Rule 4 and 8 of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....blicity and Public Relations, Customs and Central Excise, New Delhi, wherein it has been clarified that Notification No. 14/02-C.E. and 15/02-C.E., both dated 1-3-2002, prescribed effective rate of duty of nil or 12% ad valorem in case of textile fabrics subject to the condition that the goods should have been made from textile yarns or fabrics an which appropriate duty of excise or additional customs duty under Section 3 of the Customs Tariff Act, has been paid and that explanation-II to the notification makes it abundantly clear that all the fabrics and yarns are deemed to be duty paid even without production of documents evidencing the payment of duty, and that in view of this, the Appellant were eligible for concessional rate of duty on the clearances of processed cotton fabrics. He emphasised that in view of Explanation-II readwith Explanation-VII to the Notification No. 14/02-C.E., the inputs-namely fibres, yarn and unprocessed fabrics have to be treated as duty paid even without production of duty paying documents. 2.2 Shri B.K. Singh, the learned Joint CDR, defending the impugned order pleaded that under Notification No. 14/02-C.E., the concessional rate of duty in respect....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... duty has been paid on the cotton yarn, the condition for concessional rate of duty in processed cotton fabrics cannot be treated as satisfied by applying Explanation VII, that the Tribunal's judgment in the case of CCE, Ludhiana v. Prem industries (supra), which was in respect of processed man made fabrics, is not applicable to the facts of this case, as in this case dispute is respect of rate of duty on the processed cotton fabrics, which have been manufactured in a continuous process starting from cotton while being non-excisable is non-duty paid. 3. We have carefully considered the submissions from both the sides and perused the records. The appellant are a composite mill manufacturing cotton as well as man made blended yarn and processed fabrics of cotton as well as blended yarn. The dispute, however, in this case is only about the applicable rate of duty in respect of processed cotton fabrics cleared during the period from October 2002 to February 2003. There is no dispute about the fact that the appellant, for manufacture of processed cotton fabrics starting from cotton, manufactured cotton yarn which was woven into fabrics and full duty exemption in respect of cotton....
X X X X Extracts X X X X
X X X X Extracts X X X X
....anation in such notification or order by notification in the official Gazette, at any time within one year of the issue of the exemption notification under Section 5A(1) or exemption order issued under Section 5A(2) and every such exemption shall have effect as if it had always been the part of such exemption notification or exemption order. By Notification No. 37/2002-C.E., dated 3-7-02, issued under Section 5A(2A) in respect of exemption Notification No. 14/02-C.E., the Central Government added Explanation-VII to this exemption notification, which is as under : "Explanation VII - In this notification, (1) for the removal of doubt, it is hereby clarified that in Explanation II and in condition Nos. 1 & 2 specified below the Table, the expression - "textile yarn" is intended to include therein "textile fibre" also, (2) for the purposes of exemption to processed textile fabrics, specified in the table against any of the Sl. Nos. 3, 4, 6, 7, 8, 13 and 16 manufactured by a composite mill (i.e. a manufacturer engaged in processing of fabrics alongwith the spinning of yarn from fibres and weaving or knitting or crocheting of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation to be placed upon the phrase "on which the appropriate amount of duty of excise has already been paid". 3.In the case of Usha Martin the relevant Exemption Notification, so far as is relevant, read thus : "Exemption in goods falling under Item 26-AA(i-a) made from duty-paid material : In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 and in supersession of the notification of the Government of India in the M.F. (D.R.) No. 131/62-C.E., dated 13-6-1962, the Central Government hereby exempts iron or steel products falling under sub-item (i-a) of Item No. 26-AA made from any of the following materials or a combination thereof namely : fresh unused (i) re-rollable scrap 'on which the appropriate amount of duty of excise has already been paid'..,".  (Emphasis supplied) The other clauses used the same phrase. The Court said that there was "no doubt that as per the above notification if any amount of duty has been paid on the raw material, the output product would escape from excise duty. The doubt which arose was regarding the expression in the notification i.e.; 'on which the appropriate amount of duty of excise has alread....
X X X X Extracts X X X X
X X X X Extracts X X X X
....appropriate" had been mislaid. All that the word "appropriate" in the context means is the correct or the specified rate of excise duty. 6. An exemption notification that uses the said phrase applies to goods which have been made from duty paid material. In the said phrase, due emphasis must be given to the words "has already been paid". For the purposes of getting the benefit of the exemption under the notification, the goods must be made from raw material on which excise duty has, as a matter of fact, been paid, and has been paid at the "appropriate" or correct rate. Unless the manufacturer has paid, the correct amount of excise duty, he is not entitled to the benefit of the exemption notification. 7. Where the raw material is not liable to excise duty or such duty is nil, no excise duty is, as a matter of fact, paid upon it. To goods made out of such material, the notification will not apply." 4.1Applying the ratio of the above-mentioned judgment of the Hon'ble Supreme Court, in this case neither the cotton which being natural produce is non-excisable nor the cotton yarn and unprocessed cotton fabrics, in respect of which full duty exemption under Notification No.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion. In other words, the explanation absolves the assessee from the primary obligation of an assessee which is otherwise required to be performed while claiming any benefit under a taxing statute and it relates to the proof of payment of duty. It is settled law that it is always for the assessee to establish that he has discharged the liability regarding the payment of duty or tax. Only when this primary burden is discharged, the onus shifts upon the department to establish that the assessee is a defaulter. In case of claim of benefit under the notification in question, however, the executives have made an exception in favour of the assessees claiming benefit under the said notification. The assessee is absolved of such primary burden. The fiction that is created under the notification therefore essentially relates to the requirement of evidence pertaining to the discharge of such burden. It cannot be extended beyond the said scope of the fiction. If it is extended to the fact of actual payment itself, it will virtually amount to rewriting the explanation. As already observed above, in order to give full effect to a legal fiction, the Courts and Tribunals are not empowered to crea....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. ...............The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs", it was ruled that "fiction under Section 18A(9)(b) therefore that failure to send an estimate under Section 18A(3) is to be deemed to be a failure to send a return must mean that all those facts on which alone there could be a failure to send the return must be deemed to exist, and it must accordingly be taken that by reason of this fiction, the notices required to be given under Section 22 must be deemed to have been given, and in that view, Section 28 would apply on its own terms". 33. The Apex Court, therefore, has clearly ruled that the fiction created under Section 18A(9)(b) which presumed failure to send return leads to presumption about compliance of requirement of service of notice. Because in the absence of service of notice under Section 22(1) and 22(2) of the Indian Income Tax....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... keep such trade practices beyond controversy in any proceeding, a deeming clause has been introduced in sub-section (1) of Section 33 saying that they should be deemed to be restrictive trade practices and in that background, there was no much scope for argument that although a particular agreement was covered by one or the other clauses of sub-section (1) of Section 33, still it should not amount to an agreement containing conditions which could be held to be restrictive trade practices within the meaning of the Act. Referring to the said deeming clause, it was specifically observed by the Supreme Court that "The legislature by a statute may create a legal fiction saying that something shall be deemed to have been done which in fact and truth has not been done, but even then Court has to give full effect to such statutory fiction after examining and ascertaining as to for what purpose and between what parties such statutory fiction has been resorted to". In the case in hand, the deeming provision relates of the existence of documentary proof relating to discharge of duty liability and not to the factum of "actual payment of duty". 35. In Moon Mills Ltd., case, the Apex Cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ull effect to the fiction created under a statute. However, in the process of giving full effect to a fiction created under a statute, the Courts and Tribunals are not empowered to create another fiction and thereby extend the benefits of the legal fiction under a statute to a totally different situation. 37. Undoubtedly, the explanation in question creates a fiction about the presumption of payment of the duty for the purpose of condition. It does not enlarge the scope of the condition. However, every presumption is rebuttable. To interpret the fiction created under the explanation to mean that even in case of a product which is subjected to nil rate of duty to be presumed to have been subjected to the payment of duty would not only result in enlarging the scope of the explanation, but also scope of the condition itself. 38. Under the guise of interpretation of any statutory provision relating to a taxing matter, there is no power vested in the Tribunal to enlarge the scope of the exemption notification or to modify the same." 5.1 In this case, the Appellant, a composite mill, starting from cotton, a non-excisable goods, manufacture cotton yarn, which is woven....