applicability of exemption notification on DTA clearance by an EOU.

PJ/CASE LAW/2015-16/2746

Case-SARALA PERFORMANCE FIBRES LTD.VersusCOMMISSIONER OF C. EX. & S.T., VAPI

Citation-2015 (316) E.L.T. 498 (Tri. - Ahmd.)

Brief Facts-Brief facts are that appellant is a 100% EOU and is clearing, inter alia, goods in DTA (Domestic Tariff Area) availing the benefit of Notification No. 7/2003-C.E., dated 1-3-2003 and Notification No. 30/2003-CC, dated 9-7-2004 and received the input where CVD paid is ‘NIL’. Revenue denied the benefit of these Notifications on the ground that appellant do not fulfil the condition of the Notifications, hence the present appeals.

Appelants Contention-Shri Prakash Shah (Adv.) appearing on behalf of the appellant argued that appellant is a 100% EOU engaged, inter alia, in the manufacture of Nylon Filament Yarn of 210 Denier and 210/2 ply Denier. That the dispute in the present appeals is denial of exemption under Notification No. 7/2003-C.E., dated 1-3-2003 up to 8-7-2004 and thereafter Notification No. 30/2004-C.E., dated 9-7-2004 in respect of 210 denier Nylon Yarn cleared by the appellant in DTA. Learned Advocate argued that the exemption under the above Notification is proposed to be denied on the grounds that no duty is paid on inputs (Nylon chips) acquired by the appellant. The second issue is payment of education cess on duty paid by the appellant while making clearance in DTA. It was his case that the condition of these Notifications is that no credit on inputs or capital goods is taken by the assessee availing these exemption. It was argued that no credit was taken with respect to inputs by the appellant. Learned Advocate made the Bench go through the language of the condition specified in Notification No. 76/2003-C.E. and 30/2004-C.E. He also relies upon the Larger Bench decision in the case of Kumar Arch Tech Pvt. Ltd. v. CCE,Jaipur-II [2013-TIOL-614-CESTAT-DEL-LB = 2013 (290)E.L.T.372 (Tri.-LB)] to drive home the point that third time cess is not payable. With respect to admissibility of Notification No. 30/2004-C.E. Ld. Advocate relied upon Order-in-Appeal No. A/815 to 820/2007/C-1/EB, dated 15-10-2007 where the benefit of Notification No. 30/2004-C.E. has been extended for DTA clearance. He also relied upon H.P. High Court Order in the case of Satya Metal v. UOI [2013 (290)E.L.T.514 (H.P.)] to argue that only effective rate of Central Excise Duty will be applicable.

Respondents Contention-Shri K. Shivkumar (AR) appearing on behalf of the Revenue argued that not taking of Cenvat credit presupposes that duty on the inputs is paid. It was his case that in these proceedings appellant has not paid any duty on the inputs used in the manufacture of the finished goods for which exemption is sought. Learned AR argued that as per the provision of Section 5A of the Central Excise Act, 1944 no exemption issued under Section 5A shall be applicable to the goods produced or manufactured by a 100% EOU.

Reasoning Of Judgement-Heard both sides and perused the case records. So far as applicability of effective rate of duty on DTA clearances of a 100% EOU is concerned it is observed that the issue is no more res integra. Himachal Pradesh High Court in the case of Satya Metals v. Union of India (supra) after following the judgment of Supreme Court in the case of Hyderabad Industries Ltd. v. UOI [1999 (108)E.L.T.321 (S.C.)], held that effective rate of a Central Excise exemption Notification will be applicable. Similarly with respect to the issue of payment of third time cess CESTAT Larger Bench in the case of Kumar Arch Tech Pvt Ltd. v. CCE, Jaipur-II (supra) has held that third time cess on DTA clearances from 100% EOU cannot be charged.
Regarding admissibility of exemption under Notification No. 30/2004-C.E., dated 9-7-2004 appellant argued that there is no such condition in the exemption Notification that duty should be paid on the inputs. It is the case of appellant that the only condition prescribed is regarding not taking Cenvat credit with respect to the inputs. For better appreciation the text of Notification No. 30/2004-C.E., dated 2-7-2004 is reproduced below :
“In exercise of the powers conferred by sub-section (1) of the Section 5A of the Central Excise Act 1944 read with sub-section (3) of Section 3 of the Additional duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and in suppression of the Notification of the Government of India in the Ministry of Finance (Department of Revenue) No 7/2003-Central Excise dated the 1st March 2003, published in the Gazette of India vide number G.S.R. 137(E) dated 1st March, 2003, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the excisable goods of the description specified in Column (3) of the Table below and falling within the Chapter heading No or sub-heading number of the first schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the Central Excise Tariff Act) specified in the corresponding entry in column (2) of the said Table, from whole of the duty of excise leviable thereon under the said Central Excise Act.
Provided that nothing contained in this notification shall apply to the good in respect of which credit of duty on inputs or capital goods has been taken under the provisions of the Cenvat Credit Rules, 2002 :

Sr. No.	Chapter or heading No. or sub-heading No.	Description of Goods
7	5402.10	Nylon filament yarn or polypropylene multifilament yarn of 210 deniers with tolerance io 6 per cent.
	5402.41
	5402.49
	5402.51
	5402.59
	5402.61
	5402.69

Similar wording has been used regarding not taking of Cenvat credit on inputs under Notification No. 7/2003-C.E., dated 1-3-2003.From the above language used in the exemption notifications it is observed that there is no prescribed condition that duty should be paid on the inputs. The only condition is that an assessee claiming these exemptions should not take any Cenvat credit. Also there is no such condition that unless the inputs are clearly recognisable as non-duty paid in these notifications. This interpretation also finds support from the decision given by CESTAT, Mumbai, in the case of Garware Marine Industries Ltd. and Others v. CCE, Aurangabad under order Nos. A/815 to 820/2007/C-I(EB), dated 15-10-2007. Para 4 of this order is relevant and is reproduced below :
“We find force in the submission of the appellants that the benefit of exemption in terms of Notification No. 30/2004 with effect from 9-7-2004 cannot be denied to them for the reason that the product in question viz., Nylon twine has been manufactured by out of monofilament/multifilament yarn on which undisputedly no credit of duty has been taken.The language of the Notification does not lend itself to the interpretation of Revenue viz., that the inputs should be duty paid. The only condition in the proviso is that no credit of duty on the inputs used in the manufacture of the goods for which the benefit of the Notification is being claimed, should be taken. Since admittedly, no credit was taken on the inputs used for the manufacture of Nylon twine there is no valid reason for disallowing the benefit of exemption in terms of Notification No. 30/2004. We, therefore, hold that the benefit of exemption in term of Notification No 30/2004 is admissible to the disputed product manufactured by both the appellants for the period subsequent to 9-7-2004.”
In view of the above observations and settled legal proposition appeals filed by the appellants are allowed with consequential relief, if any.

Decision-Appeal allowed

Comment-The analogy in the case is that for availing the benefit of notification no.7/2003-CE and notification no.30/2003-Cus there is no prescribed condition that duty should be paid on inputs. The only condition is that the assessee should not take any cenvat credit in respect of the inputs used in the manufacture of goods for which benefit under the notification has been claimed. This was based on the landmark decision in the case of Garware Marine Industries Ltd. and Others v. CCE, Aurangabadand inHyderabad Industries Ltd. v. UOI it was held that the effective rate of a duty will be applicablefor the payment of education cess on duty paid by the assessee while making clearance in DTA and the third time cess cannot be charged on DTA clearances from 100% EOU as was also held in Kumar Arch Tech Pvt Ltd. v. CCE, Jaipur-II.

Prepared By-Neelam Jain

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PJ/CASE LAW/2015-16/2746

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