Whether benefit under notification no. 1/2011 available to R.C. Mattresses?

PJ/CASE LAW/2015-16/2576

Case:- KURLON LTD. Versus COMMR. OF C. EX. & SERVICE TAX, INDORE

Citation:-2015 (315) E.L.T. 232 (Tri. - Del.)

Brief facts:-These appeals have been filed by M/s. Kurlon Ltd. along with their stay application against Orders-in-Original No. 07 & 08/COMMR/CEX/IND/2013, dated 1-4-2013. In terms of the said Orders-in-Original, demand of Rs. 17,17,06,379/- along with interest and penalty was confirmed on R.C. Mattresses for the period April 2008 to February 2011 relating to show cause notice dated 26-3-2012 and demand of Rs. 29,46,112/- along with interest and penalty was confirmed in respect of show cause notice dated 22-11-2012 on R.C. Mattresses cleared during the period March 2011 to May 2012. The adjudicating authority confirmed the demand on the ground that R.C. Mattresses (Rubberised Coir Mattresses) cannot be treated as coir products and therefore, are not eligible for the benefit of Notification No. 6/2006-C.E. dated 1-3-2006 up to 28-2-2011 and for the benefit of Notification No. 1/2011 dated 1-3-2011 for the remaining period. The adjudicating authority came to the finding that R.C. Mattresses manufactured by the appellants are not eligible for the coverage under the scope of coir products by referring to dictionary meaning of coir products. Thereafter the adjudicating authority determined the short levy by applying the normal rate of excise duty, that is 10.3% and 12.3% as applicable during the relevant period.

Appellant’s contention:- The appellants have contended that
(i)     R.C. Mattresses are coir products as clarified by C.B.E. & C. Circular No. 23/14/86-CX-1 dated 25-6-1986. In para 2 of the said circular, C.B.E. & C. observed as under :
        “The matter has been considered in the Board’s Office. Board observes that Section 3(d) of the Coir Industry Act, 1953 defines coir products as ‘mats, mattings and carpets, ropes and other articles manufactured wholly or partly from coir or coir yarn’. In terms of this definition rubberised coir mattresses of the type mentioned above would be covered as coir product, A specific reference was made to the Coir Board, Government of India, Cochin who have confirmed that rubberised coir industry should be treated as coir industry for the purpose of excise duty exemption in this case. Board accordingly, holds that such rubberised coir mattresses would be eligible for exemption in terms of Notification No. 115/75-C.E., dated 30-4-1975, as amended”.
(ii)    The appellants have also mentioned that the Finance Minister on the floor of the Parliament in his budget speech 2011-12 stated that a nominal Central Excise duty of 1% is being imposed on the 130 items that are entering the tax net. No Cenvat credit would be available for the manufacture of these items. The impugned goods namely R.C. Mattresses was included in the list of these 130 items.
(iii)   As per the Coir Board, Kochi letter, dated 5-6-2012 it has been clarified that any product with coir content of more than 25% of the weight are coir products and R.C. Mattresses manufactured by the appellants have coir content of more than 70% a fact which is not challenged.
(iv)   That with effect from 1-3-2011 the rate of duty on the impugned goods is 1% and from 17-3-2012 it was hiked to 2% vide amending Notification No. 16/2002, dated 17-3-2012 which they have discharged.

Respondent’s contention:-The respondent reiterated the findings of the lower authorities.

Reasoning of judgment:-As the issue is covered by judicial pronouncements, with the consent of both sides, they proceed to decide the appeals waiving the pre-deposit. They agree with the contention of the appellants that the Coir Board’s opinion whether a product is a coir product or not is relevant for the purpose of classifiable under Central Excise Tariff and the C.B.E. & C. Circular mentioned above is in conformity with the opinion of the Coir Board. In the wake of this, reliance by the Commissioner on some dictionary meaning for the purpose of deciding whether the impugned goods are coir product does not sustain. They find that the exemption Notification No. 6/2006, dated 21-6-2006 was applicable to coir products. This exemption was available till 28-2-2011 when it was withdrawn and duty @ 1% was imposed vide Notification No. 1/2011, dated 1-3-2011 which was hiked to 2% vide amending Notification No. 16/2012, dated 17-3-2012. In the case of Regal Industries Ltd.v. CCE, Chandigarh - 2001 (130)E.L.T.176 (Tri.-Del.) the CESTAT held that R.C. Mattresses containing 55.5% coir and 33.8% latex are treatable as product of coir industry and this order was upheld by Supreme Court - 2006 (200)E.L.T.513 (S.C.). Similar view was held in the case of Hindustan Coir Products Ltd.v. CCE, Meerut - 2002 (148)E.L.T.1085 (Tri.-Del.)and in the case of Duroflex Ltd.v. CCE, Chennai - 2005 (180)E.L.T.235 (Tri.-Bang.). Thus it is obvious that the impugned demand for the period up to February 2011 does not survive. For the subsequent period, it is seen that for the period 1-3-2011 to 16-3-2012 the effective rate for coir products was 1% and from 17-3-2012 it was 2% ad valorem subject to the condition that there was no Cenvat credit taken on the inputs or input services. The appellants have stated that they have already paid the duty.
In the foregoing circumstances there is no justification for imposition of any penalty.
In view of foregoing, the appeals are allowed and the impugned orders set aside to the extent that.
(i)     The impugned demand for the period upto 28-2-2011 is set aside.
(ii)    For the period 1-3-2011 to 16-3-2012, the demand as recomputed @ 1% ad valorem and for the period 17-3-2012 upto the end of the impugned period (May 2012), the demand recomputed @ 2% ad valorem is upheld/confirmed.
(iii)   Penalty is set aside.

Decision:- Appeal allowed.

Comment:- The analogy of the case is that in order to determine whether exemption available for coir products is also available to RC mattresses, the clarification issued by the CBEC and the literature issued by the Coir Board is to be considered as relevant rather than the dictionary meaning. Accordingly, it was concluded that the exemption is available to RC mattresses.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2576

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