AI Drafter 
TaxTMI 
TaxTMI 
2016 (8) TMI 128
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..... Issue pertains to grant of benefit of exemption under Notification No. 14/02-CE and 15/02-CE both dated 01.03.2002. These notifications give the benefit of concessional rate or nil rate of duty to the knitted garment manufacturers on certain conditions. One of the conditions is for full exemption is that knitted garments are exempt if manufactured out of knitted fabrics on which appropriate duty of excise has been paid and no cenvat credit of duty paid on inputs or capital goods has been taken. If Cenvat credit is taken, the duty is at concessional rate. 2. The Revenue has taken the position that the benefit of these notifications is available only when the garments have been manufactured from the duty paid fabr....
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.... Assessee does not take any MODVAT credit of the duty paid on the yarn. Assessee manufactures the knitted fabrics in its factory out of the duty paid yarn. The knitted fabric is entirely captively consumed in the manufacture of knitted apparels. The apparels are thereafter cleared outside the factory. 5. Vide Union Budget 2002, a new excise duty scheme for textile sectors was introduced. Under this scheme, vide Notification Nos. 14/2002-CE and 15/2002-CE dated 01.03.2002, fabric manufacturers and garment manufacturers were given an option to operate under two different schemes. Under one scheme, where the manufacturers of the fabric or garment wants to avail the MODVAT credit of the duty paid on the inputs or the c....
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....e of duty of excise leviable on knitted garments falling under heading 61.01 subject to the satisfaction of Condition No. 4 of this notification. As per Condition No. 4 of the notification, knitted garments are exempt provided these garments are manufactured out of knitted fabrics on which appropriate excise duty has been paid and no cenvat credit of duty paid on the inputs or capital goods has been taken. 8. Show cause notice dated 27.03.2003 was issued by the Commissioner of Central Excise, proposing to deny the benefit of Notification No.15/2002-CE to the apparels and demanding excise duty in respect of the clearances made between 01.03.2002 to November, 2002. The assessee submitted its reply. After considering the r....
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.... 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." 10. The Tribunal has also rejected the contention of the assesse predicated on Explanation II to the notification by observing that the said explanation only dispenses production of documents evidencing payment of duty and does not waive the condition of payment thereof. 11. Challenging the aforesaid rationale adopted by the Tribunal in arriving at the impugned decision, the learned counsel for the Revenue made his submission on two fronts. In the first instance, it was argued that the Tribunal erred in relyi....
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....on Budget 2002, a new excise duty scheme for textile sector was introduced, as per which manufacturers of the fabric or garments were given choice to opt under one of two schemes. Normal rate of duty is 12%. The two notifications provided exemption and concessional rates respectively. Those who wanted to avail the MODVAT credit of the duty paid on the inputs or the capital goods, were supposed to pay excise duty at concessional rate i.e. 75% of the normal rate of duty. Under the other scheme, full exemption from payment of duty was granted to those who did not wish to avail the MODVAT credit facility. These two schemes were explained in the Budget Explanatory Notes issued by the Central Government, relevant portion whereof is ex....
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....ould be allowed without insisting upon any documentary proof for payment of duty. However, if the manufacturer wants to avail cenvat credit of duty paid on inputs or capital goods on actual basis, he will be required to produce duty paying documents as prescribed under the Cenvat credit rules." 15. A reading of the aforesaid Explanatory Note makes it clear that those who did not want to avail MODVAT facility were allowed to clear the goods without payment of any excise duty. It is in this context that the authorities were asked not to insist upon any documentary proof for payment of duty and this was transported into the notification, in the form of Explanation II. It, therefore, becomes clear that when Explanation II states ....