TaxTMI 
TaxTMI 
2017 (10) TMI 133
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....processed knitted fabric at processing unit. The said fabric was then cleared from the factory of the appellant to their sales office located at Mumbai from where it is sold to customers. The dyed processed knitted fabric is cleared by raising invoice as per Rule 11 of the Central Excise Rules, 2002, wherein it was shown Nil rate of duty by claiming the exemption Notification No.14/2002-CE dated 01/03/2002. A show-cause notice was issued proposing denial of exemption notification and consequential demand in the light of the CBEC Circular No.667/58/2002-CX dated 26/09/2002 wherein it was clarified that the exemption will not be available if the inputs used in the manufacture is exempted from excise duty or subject to Nil rate of duty. The adjudicating authority confirmed the demand and the Ld. Commissioner (Appeals) upheld the same, therefore, the appellants are before us. 2. Shri R.B. Pardeshi, Ld. Counsel appearing on behalf of the appellant submits that the appellant product, i.e., processed fabric of cotton is exempted as per Sl.No.12 of Notification No.1/2002-CE dated 01/03/2002 as amended by Notification No.37/2002-CE dated 03/07/2002. He submits that there is no dispute that....
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....3. On the other hand, Shri Sanjay Hasija, Ld. Superintendent (AR) appearing on behalf of the Revenue reiterates the findings in the impugned order. He submits that since the independent goods manufactured by the appellants other units cleared under exemption notification No.14/2002-CE. It is clear that it cannot be treated as deemed duty paid, therefore, such goods which is not duty paid used in the manufacture of processed fabrics by the appellants, the exemption Notification No.14/2002-CE is not applicable to the appellants. As regards the submission of the Ld. Counsel that both the units are same, Ld. AR submits that both are in different location. One is registered with Central Excise and the other who supplied the grey fabric is not registered with the Central Excise. Therefore, both the units are different and cannot be treated as one unit. He further submits that as per amended Notification No.37/2002-CE dated 03/07/2002, explanation (vii) was added according to which for the purpose of processed textile fabrics exception is provided only if the intermediate goods and final products manufactured by a composite mill wherein the yarn used for the manufacture of such fabric sho....
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....ation II. - For the purposes of the conditions specified below, textile yarns or fabrics shall be deemed to have been duty paid even without production of documents evidencing payment of duty thereon. 4.2 From the above explanation, it is clear that all the textile fabrics used for the manufacture of final products shall be deemed to have been duty paid even without production of documents evidencing payment thereof. As per this explanation it is not required to look into the facts whether the grey fabrics was suffered duty or otherwise and all the fabrics used shall be treated deemed duty paid and accordingly, the condition stands fulfilled. This issue has been considered in detail in the various judgements. In the case of Arvind Products Ltd. (supra), the Larger Bench of this Tribunal observed as under: "9. In view of the above observations we hold that decisions taken in the case of CCE, Ludhiana v. Prem Industries (supra), Simplex Mills Co. Limited v. CCE (supra) and Morarjee Gokuldas Spg. & Wvg. Co. Limited v. CCE (supra) were correct interpretation of exemption Notification No.14/2002-C.E., dated 1-3-2002, Accordingly, benefit of Sr. No. 12 of Notification No.14/2002-C.E., ....
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....use like, the one which exists in Notification No.3/2003-C.E., dated 6-1-2003, is available while amending Condition-3 of Notification No.14/2002-C.E. therefore, the same can not be considered curative and retrospective in operation. 11. In view of the above analysis and observations we hold that the reference regarding admissibility of exemption under Sr. No. 12 of Notification No. 14/2002-C.E., dated 1-3-2002 is answered in favour of the appellants and against the Revenue. Relevant appeal files should be listed before the regular bench for disposal." 4.3 As per the above decision, the Larger Bench held that the fabrics received for processing should be treated deemed duty paid as per the explanation (2) of Notification No.14/2002-CE. The Larger Bench also distinguished the judgements of Hon'ble Supreme Court in the case of Dhiren Chemical Industries (supra) relied upon by the Ld. AR. The aforesaid judgement of the Larger Bench has been upheld by the Hon'ble Supreme Court by dismissing the department's appeal. The Hon'ble Supreme Court while dismissing the department's appeal relied upon its earlier judgement in the case of Sports & Leisure Apparel Ltd. (supra) wherein ....
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....rate of duty should 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 that the duty shall be deemed to have been paid even without production of documents evidencing payment of duty thereon, it was clearly meant that no duty was required to be paid by the manufacturers of knitted garments. Such an intention is clearly reflected in the Government's own Budgetary Notes extracted above. We, thus, hold that Explanation II to the said exemption Notification Nos.14/2002 and 15/2002 create legal fiction and tha....