For claiming duty concession under Notification No. 23/2003, clearance to DTA has to be as per EXIM policy.

PJ/CASE LAW/2014-15/2442

Case:- HANIL ERA TEXTILES LTD. VERSUS COMMISSIONER OF C. EX., RAIGAD

Citation:-2014 (307) E.L.T. 537 (Tri. - Mumbai)

Brief facts:-The appeal is directed against Order-in-Original No. 11-12/SLM(11-12)Commr/RGD/08-09, dated 20-8-2008 passed by Commissioner of Central Excise, Raigad. Vide the impugned order, a duty demand of Rs. 67,97,614/- has been confirmed along with interest thereon and also imposing equivalent amount of penalty against the appellant, M/s. Hanil Era Textiles Ltd. This demand pertains to the clearances of acrylic yarn, polyester/blended yarn and blended waste in DTA during the period from 1-7-2004 to 7-7-2004 and March, 2005 to August, 2005. Aggrieved of the same, the appellant is before tribunal.

Appellant’s contention:- The learned Consultant submits that the demand consists of two parts, one for an amount of Rs. 2,20,587/- for the period 1-7-2004 to 7-7-2004 and another for an amount of Rs. 65,77,027/- for the period March to August, 2005. As regards the demand for Rs. 2,20,587/-, this demand is on account of levy of Additional Excise Duty (AED) under the Additional Duties of Excise (Textiles and Textile Articles) Act 1978 and out of this demand, an amount of Rs. 1,64,199/- has already been paid by the appellant under protest and therefore, the balance amount due is only Rs. 56,388/-. This fact has not been taken into account by the adjudicating authority while confirming the demand along with interest and while imposing penalty. As regards the demand for Rs. 65,77,027/- the demand pertains to three types of goods, (i) Acrylic Yarn (ii) Blended/Polyester Yarn and (iii) Blended Waste. The appellant discharged duty liability of these goods at the rates applicable to such goods manufactured by units in DTA in terms of Notification No. 23/2003-C.E., dated 31-3-2003, inasmuch as the goods were manufactured out of indigenously procured raw materials, whereas the contention of the Revenue is that the goods manufactured and cleared into DTA are from imported materials also. Bulk of the demand pertains to Blended/Polyester Yarn and the demand in this regard is Rs. 58,47,728/-. As per the verification done by the department, the appellant had not imported any polyester fibre during the impugned period. It is also contended that the blended yarn cleared by the appellant is polyester-cotton blends. Since both polyester and cotton fibres are procured domestically, duty rates applicable would be equal to the excise duty leviable on like goods produced/manufactured in India in the DTA vide Serial No. 3 of the Notification No. 23/2003. As regards the duty demand on acrylic yarn and blended waste, the appellant used to procure acrylic tow and fibre both by way of imports as also domestically. It is, however, their contention that the acrylic yarn cleared into DTA is manufactured from domestically procured acrylic fibre. Similarly, the blended waste also arise out of domestically procured raw materials. The learned Counsel further contends that while computing the duty, there were certain errors committed. The basic Customs duty adopted for the calculation is 20% whereas the applicable rate was only 15%. Therefore, according to the appellant if the correct duty rates are taken into account, the duty demand would come down to Rs. 48,28,124/-. It is also his contention that they produced a Chartered Accountant’s certificate certifying that the goods cleared into DTA were manufactured from domestically procured raw materials. Inasmuch as these facts have not been given due consideration by the adjudicating authority, the matter needs to go back to the adjudicating authority for re-consideration.

Respondent’s contention:- The learned Additional Commissioner (AR) on the other hand makes the following submissions. As per the verification done by the jurisdictional Superintendent, the appellant used to import acrylic fibre as also domestically procure the same. The appellant has not maintained any records showing the consumption of raw materials from different sources and how much quantum of yarn has been produced out of the raw materials domestically procured. As per the verification done by the jurisdictional Superintendent, during the impugned period, the appellant had imported about 2400 MTs of acrylic tow and about 250 MTs of acrylic fibre/tow. In the absence of separate records, the appellant cannot claim that the acrylic yarn manufactured and supplied to DTA were all from indigenous source of raw materials and not from imported sources of raw materials. It is for this reason that the adjudicating authority has confirmed the duty demand on acrylic yarn manufactured and cleared by the appellant. Similarly, in respect of waste, it is an accepted position that the appellant did not segregate the waste which consists of acrylic waste, polyester and cotton waste. Therefore, the duty demand on the waste is also correct. In respect of blended/polyester yarn, though as per the Superintendent’s verification report, the appellant did not import any polyester staple fibre during the impugned period, it is not known whether the appellant had any imported stock already available from which the yarn was manufactured. Similarly, the blended yarn cleared by the appellant into DTA does not show what is the blend of the material. The appellant’s contention is that blended yarn is of polyester and cotton; however no evidence has been produced by the appellant to show that the yarn cleared was polyester/cotton blend and not polyester-acrylic blend. Therefore, the adjudicating authority was right in denying the benefit of concessional rate of duty on polyester blended yarn under Notification No. 23/2003. It is his further contention that to claim the benefit under said notification, the goods should have been cleared to the DTA as per the provisions of sub-paras (a), (b), (d) and (h) of Para 6.8 of the Export Import Policy. No evidence has been adduced by the appellant to show that the clearance have been made in terms of these paragraphs. In view of the above position, it is his contention that the impugned order is sustainable in law.

Reasoning of judgment:- As regards the claim of the appellant that they have manufactured the various yarns and waste out of indigenously procured raw materials, there is no evidence forthcoming in this regard by way of statutory records maintained by the appellant. The Chartered Accountant’s certificate is not a document on the strength of which duty exemption can be claimed. It is based on the records maintained by the appellants, the eligibility to exemption has to be determined. As regards the contention of the appellant that in respect of polyester blended yarn, inasmuch as they have not imported any polyester fibre, the goods should be deemed to have been manufactured out of indigenous material. Though there is some merit in this contention, there is no evidence forthcoming with respect to the composition of blend. If the blended yarn consists of acrylic fibre, even if polyester yarn might not have been imported, inasmuch as acrylic fibre has been imported, the appellant would not be eligible for the duty concession under Notification No. 23/2003. Further, to claim the benefit under the aforesaid notification, the clearance to DTA has to be in terms of the EXIM policy mentioned therein. All these issues require careful and detailed examination, which has not been done by the adjudicating authority while passing the impugned order. The composition of the blended yarn could have been easily ascertained from the sales invoices and the prices quoted. This is the second round of litigation and during the first round, the matter was remanded to the adjudicating authority with appropriate directions in this regard. In the absence of a clear finding recorded by the adjudicating authority based on documentary evidences, they are constrained to remand the matter back to the adjudicating authority once again for verifying all the facts involved and thereafter pass an order in accordance with law. The appellant is also directed to lead evidence before the adjudicating authority showing that blended yarn cleared consisted of only polyester/cotton blend and not any other material and the clearances were effected in terms of the provisions of EXIM policy mentioned in the notification. All issues are kept open.
Thus, the appeal is allowed by way of remand.

Decision:-Appeal allowed by way of remand.

Comment:- The crux of the case is that clearance to DTA has to be in terms of the EXIM policy for claiming the benefit of duty concession under notification no. 23/2003. As the adjudicating authority failed to properly ascertain the facts and pass proper order, the appeal was allowed by way of remand again. It is commonly observed that certain verifications are to be made by the adjudicating authority themselves and in their failure to properly verify the same, the matter is remanded to them again and again. This has become a common feature where the issue involved requires examination and verification by the adjudicating authority.

Prepared by:- Monika Tak

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PJ/CASE LAW/2014-15/2442

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