Excise Appeal No.762 of 2012
(Arising out of OIA-729-744/2012/COMMR-A-/RBT/RAJ dated 21/08/2012 passed by
Commissioner of Central Excise-RAJKOT)
Deepak Processors
VERSUS
C.C.E. & S.T.-Rajkot
WITH
Excise Appeal No. 763 of 2012 (Jagjit Textile Dying & Print)
Excise Appeal No. 764 of 2012 (R B Prints)
Excise Appeal No. 821 of 2012 (Balkrishna Textile
Industries)
Excise Appeal No. 822 of 2012 (Rakesh Folding Works)
Excise Appeal No. 823 of 2012 (Jaldarshan Textile)
Excise Appeal No. 824 of 2012 (Jankeshwari Textile)
Excise Appeal No. 825 of 2012 (Chandrajyot Dyeing &
Printing Works)
Excise Appeal No. 826 of 2012 (Amarouja Textile Printery)
Excise Appeal No. 827 of 2012 (Jayshree Impex)
Excise Appeal No. 828 of 2012 (Patidar Prints)
Excise Appeal No. 829 of 2012 (V V Prints)
Excise Appeal No. 830 of 2012 (Ambika Industries)
Excise Appeal No. 831 of 2012 (Monisha Tex O Print)
Excise Appeal No. 832 of 2012 (Purni Textile)
(Arising out of OIA-729-744-2012-COMMR-A–RBT-RAJ dated 21/08/2012 passed by
Commissioner of Central Excise-RAJKOT)
APPEARANCE:
Shri Paresh Sheth & Shri P D Rachchh, (Advocates) for the Appellant
Shri G. Kirupanandan, Superintendent (AR) for the Respondent
CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR
HON’BLE MEMBER (TECHNICAL), MR. RAJU
Final Order No. A/ 10135-10149 /2023
DATE OF HEARING: 19.09.2022
DATE OF DECISION: 25.01.2023
RAMESH NAIR
The appellants have filed these 15 appeals against the impugned
order-in-appeal dated 21-08-2012 passed by the Commissioner of
Central Excise (Appeals), Rajkot whereby the Commissioner (Appeals)
has denied the benefit of Deemed Credit. Since the issue involved in all
these appeals is common, all the 15 appeals are disposed of by this
common order.
- Briefly the facts of the present case are that all the appellants are
engaged in the manufacture of excisable goods falling under chapter 52.
During the period from 01.07.2000 to 31.03.2003, appellants had
procured Bleached Cotton Fabrics falling under Chapter 52.07.and
processed with dyes/chemicals/ consumable and manufactured final
products viz. printed cotton fabrics falling under Chapter heading No.
5207.33. The Appellants sought permission from the Deputy
Commissioner, Central Excise, Division-II, Rajkot to allow them to take
the Deemed Credit in the Cenvat Register for the period from 01.04.2000
to 31.03.2003 under Notification No. 28/2000-CE(NT)dated 31.03.2000,
No. 07/2001-CE(NT) dated 01.03.2001, No. 53/2001-CE (NT) dated
29.06.2001 and No. 6/2002-CE (NT) dated 01.03.2002 read with Rule 11
of Cenvat Credit Rules 2002. The Deputy Commissioner vide Order No.
1/TECH/2003 dated 13.11.2003 allowed deemed credit to the appellants.
However, against the said order department filed appeal before the
Commissioner (Appeals), who vide Order-In-appeal dated 18.02.2005 has
allowed the appeals filed by the department and set aside the Order No.
1/TECH/2003 dated 13.11.2003.
2.1 Further, subsequent to the Order No. 1/TECH/2003 dated
13.11.2003, all the appellant took the deemed credit and to safeguard
the government revenue, the Commissioner, Central Excise, Rajkot
issued show cause notices to all these appellants. Since the Order No.
1/TECH/2003 dated 13.11.2003 of the Deputy Commissioner was set
aside, the Commissioner of Central Excise, Rajkot vide Order-In-Original
dated 26.04.2005 also disallowed the deemed credit taken by the
appellants. Aggrieved with the Order-In-Appeal dated 18.02.2005 and
Order-In-Original dated 26.04.2005, Appellants have filed appeals before
the CESTAT. The CESTAT vide Order dated 05.06.2006 and 23.08.2007
remanded the matter back to the original authority. In de-novo
proceedings the Assistant Commissioner, Rajkot vide Order –In-Original
dated 19.11.2011 disallowed the deemed credit to all the appellants and
ordered for appropriation of the amount already reversed, and also
ordered for recovery of interest under Section 11AB of the Central Excise
Act, 1944 read with Rule 14 of the Cenvat Credit Rules, 2004. Being
aggrieved with the order appellants filed the appeals before the
Commissioner (Appeals) who ,vide impugned order –in-appeals rejected
the appeals filed by the appellants and upheld the Order-In-Original
dated 19.11.2011. Hence the appellants are before us.
- Learned Counsel Shri P.D. Rachchh appearing on behalf of the
appellants submits that sole issue to be decided in the instant cases is
whether benefits of deemed credit under the following Notification can be
extended to the Appellants in terms of Explanation 3 to the said
Notifications.
Notification No. 28/2000-CE(NT) dated 31.03.2000
Notification No. 7/2001-CE(NT) dated 31.03.2001 as amended
Notification No. 53/2001-CE (NT) dated 29.06.2001
Notification No. 6/2002-CE (NT) dated 01.03.2002 as amended
It is the case of the revenue that appellants had received Cotton Printed
Fabrics, therefore as per Explanation 3 to the said Notification benefit of
said Notification cannot be extended to the appellants. Appellants had
received Cotton Grey Fabrics and since they were having only facilities for
process of printing of their factories and process of bleaching and
mercerizing was must before the process of dyeing & printing and since
the processor who can carry out such processes were situated
surrounding to them in the vicinity of Jetpur town of Gujarat, with the
mutual understanding with the merchant exporters for ease of
transportation and to save cost Cotton Grey Fabrics were first sent to the
premises of the processors who had carried out bleaching and
mercerizing. Therefore all the appellants are entitled for benefit of
deemed credit as provided under the said Notification for the period
under dispute.
3.1 He also submits that on plain reading of the Explanation 3 to the
said Notification as well as other provisions of the Notification, such
explanation excludes those processed fabrics used as an inputs for
further processing from the benefit of the Notification which were
processed in the same factory of the manufacturer and not in other
factory. Plain reading of the explanation gives the meaning that benefit of
deemed credit cannot be availed by the processor at each stage of
process as benefit of Notification No. 67/95-CE dated 16.03.1995 as
stood during the period under dispute excludes the Woven Fabrics
/Fabrics of Cotton classifiable under Chapter 52 or Chapter 54 or Chapter
- It means Woven Fabrics or Fabrics of Cotton viz., Grey, Bleached,
Dyed or Printed or any other inputs when used for manufacture of other
goods including the said goods for manufacture of other goods out of the
said four goods, if bleached fabrics is used for manufacture of printed
fabrics and on benefit of exemption for captive consumption was not
admissible and one has to pay duty of excise at each stage of
manufacture of Woven Fabrics or Fabrics of Cotton. Therefore, though
goods were not removed from the factory it has to be considered as
clearance of final products viz. Grey Fabric for bleaching, Bleached fabrics
for dying and Dyed Fabrics for printing and in that situation to prevent
availment of deemed credit benefit at each stage of process such
explanation came into picture. As per Chapter Note 3 of Chapter 52 in
relation to products of heading 52.07, 52.08 and 52.09, bleaching,
mercerizing, dyeing, printing, water proofing, shrink-proofing, organdie
processing or any other process or any one or more of these processes
shall amount to manufacture. To prevent benefit of deemed credit at such
each stage of process, said explanation is inserted in the Notification so
as to avoid any undue benefit by the manufacturer of final products.
3.2 Without prejudice, he also submits that it is not disputed by the
revenue that such processors had carried out the process of bleaching
and mercerizing without aid of power as intermediate Job Worker and
therefore, same were exempted from levy of duty of excise vide
Notification No. 6/2002-CE dated 01.03.2002 as amended (Sr. No. 112).
Therefore, benefit of the said Notification viz. deemed credit was never
availed by anyone at any stage before the appellants.
3.3 He further submits that if the said processes mentioned in Chapter
Note 3 was carried out in different factory premises, such goods were
liable to duty of excise and in that case for manufacture cotton belached
fabric, cotton grey fabrics were inputs which was also processed fabric as
notification nowhere defines the word processed fabrics, so that processor
of Bleached fabric as per Explanation 3 was not entitled for benefit of said
Notification. For the sake of argument it is assumed that Cotton Grey
Fabrics is not processed fabric and processor of bleaching and
mercerizing was entitled for benefit of deemed credit under the said
Notification in that case, such processors have to pay duty of excise and
receiver of such bleached & mercerized fabrics have to avail Cenvat
Credit under Rule 3 of the Cenvat Credit Rules, therefore as per para 4 of
the Notification such manufacturer cannot avail benefit of deemed credit
under the said Notification.
3.4 He also submits that if the interpretation made by the revenue is
accepted as correct that if processed fabric viz. Bleached & Mercerised
Fabrics is used as an input for further processing viz. Dyeing and Printing
then for carrying out any process viz., Bleaching & Mercerising if one may
receive Woven Fabrics then also it has to be considered that processed
fabrics itself is used as input for further processing, as weaving was also
a process and from yarn of fiber woven fabrics was manufactured by
process of weaving only. In that case no manufacturer may become
eligible for benefit of deemed credit under the said Notification. Such
interpretation is not permissible.
3.5 He argued that the Central Government while inserting explanation
3 purposefully not used the words “Process Fabrics itself further used as
input for manufacture of final products” but used “for further processing”
so as not to include processed fabrics manufactured by other
manufacturer in other factory while not allowing benefit of the said
Notification. If the intention was to prevent use of any processed fabrics
for manufacture of final products for debarring benefit of the said
notifications, the word further processing was not used but used for
manufacture of final product. The wordings further processing is used so
as to restrict the benefit of deemed credit at each stage of process where
more than one processes were carried out in the factory as well as in
case of composite mill also where entire processes were carried out in a
unit.
3.6 He further submits that the Notifications grant benefits of deemed
credit on the inputs stated therein in the table whether directly or
indirectly contain in the final products specified therein except for tariff
item mentioned in the bracket e.g. 5207.20 which is other fabrics, not
subject to any process. Except explanation No. 3 no other provisions
restricts the scope of the Notification, on the contrary grants benefit of
deemed credit to the manufacturer processors for all inputs and final
products mentioned in the table with certain exception of products and
not to processed fabric. In their humble view explanation cannot curtail
or restrict the benefits granted by the Notification without any reference
to the main contents of the Notification. No other provisions or contents
of the Notifications provide like that therefore, there was no need to
explain such things with the help of explanation. He placed reliance on
decision in the case of Commissioner of Cus (Prv.), Amritsar Vs. Malwa
Industries Ltd. – 2009(235)ELT 214(SC).
3.7 He also submits that the revenue failed to appreciate that the said
Notifications were issued under the provisions of Rule 57AK of the Central
Excise Rules, 1944 / Rule 11 of the Cenvat Credit Rules, 2001 / Rule 11
of Cenvat Credit Rules 2002, which very specifically provides that even if
the declared inputs are not used directly by the manufacturer of final
products declared in the said Notification, but are contained in the said
Final Products, Cenvat Credit is allowable. Thus, in grey fabric and
bleached & mercerized fabric declared inputs Cotton Yarn of 5206,
Chemicals, packing materials were contained therefore, benefit of
deemed credit is admissible. He placed reliance on the following
decisions.
Commissioner of Central Excise Vs. M B Dyers -2010(253)ELT 402
(Del)
Commissioner of Central Excise Vs. Shyam Dyers -2017(357)ELT
16 (All).
3.8 He further submits that the exemption under Notification No.
214/86-CE dated 25.03.1986 as amended was admissible to the
description of the goods mentioned in column No.2 of the table
manufactured in a factory as Job work and used in or in relation to the
manufacture of final products specified in column No. 3 of the table but
was not admissible to the goods “ Woven Fabrics classifiable under
Chapter 52/ Fabric of Cotton of Chapter 52”. Therefore, in that case
though goods were manufactured on job work basis in commercial
parlance, duty of excise had to be paid by the person who had
manufactured the goods. Since, both job workers viz. the processor of
bleaching and mercerizing and appellants were manufacturer and benefit
of Notification No. 214/86-CE dated 25.03.1986 was not admissible to the
goods manufactured by them, they were manufacturer of final products.
Therefore, if at one stage duty of excise was paid by availing benefit of
Notification viz., deemed credit then definitely at next stage when such
goods are supplied to other manufacturer scope of availment of deemed
Credit is not available as per para 4 and no manufacturer leave the
benefit of Cenvat Credit of duty paid at full rate and avail partial amount
as deemed credit. Therefore, Appellants were eligible for deemed credit
whether they had received Grey Fabric or Bleached Fabrics from other job
worker /manufacturers as nobody had availed benefit of said Notification
nor paid duty of excise at any stage. Only appellants have wished to avail
benefit of deemed credit under the said Notification first time in entire
process. Further, since the benefit of exemption for goods manufactured
on Job Work basis for manufacture of Woven Fabrics/ Fabrics of cotton
was not admissible, they were not required to keep any documents or
records in this regard but definitely since such processors become
manufacturer, manufacturer for other than exempted goods had
maintained records and books of accounts for the goods manufactured
and exported.
3.9 He submits that while observing that the original invoice and lorry
receipts could not be produced, the authority failed to consider that they
were demanding documents after almost 10 years and the universal fact
is that no businessman keeps records for 10 years. Even otherwise, since
the Appellant was acting as job worker the said documents were the
property of the merchant exporter and hence the said authority was
supposed to inquire with Exporter and not from the appellant. From the
documentary evidence produced and on the basis of statements recorded
by the investigation officer it is crystal clear that the Appellants have
received grey fabrics from the merchant exporter either in the premises
or on instruction of the appellant the merchant exporter had directly
forwarded to the Job Worker for bleaching and mercersing process where
the control of said grey fabrics was of the Appellant and accordingly it can
very well be said that the Appellant has not received processed fabrics
accordingly Explanation 3 of the relevant notification would not be
applicable, consequently the Appellants would be eligible for deemed
credit under the respective notification.
- The Learned Counsel Shri Paresh Sheth appearing on behalf of the
appellants i.e M/s Deepak Processors, M/s Jagjit Textile Dying & Printing
and M/s R.B. Prints also argued that appellants are entitled for benefit of
deemed credit.
4.1 Therefore, both the learned Counsels prayed that the impugned
order be set aside.
- On the other hand, Shri G. Kirupanandan, learned Superintendent
(AR) appearing for the revenue reiterates the findings in the impugned
orders. While drawing our attention to the findings of the learned
Commissioner (Appeals), he submits that none of the appellants
submitted any proof to prove that they have received grey fabrics as
inputs. Therefore benefit of deemed credit is not admissible to the
Appellants.
- We have considered the submissions made by both sides and
perused the records. The issue that falls for consideration in this case is
whether the appellants are eligible to avail the benefit of deemedcredit.
We find that the Tribunal while remanding the matters for de-novo had
observed as under:
“———- This would indicate that the appellants had received
gray fabrics and the same were sent for Job work, since this
facts has not been challenged by the Revenue, before the
Commissioner (Appeals) , we have to go on the footing that
what was received by the processor, who are the appellants
herein, was gray fabrics which was sent out for bleaching and
mercerizing. Therefore, prima facie we cannot not deny the
benefit of deemed credit under the relevant notification as
granted by the Deputy Commissioner. We find that this fact
whether grey fabrics were received or it was mercerized &
bleached fabrics that were received are issue which are being
contended before us since prima facie we find that gray fabrics
were admitted & not to have been challenged, as having been
received, as were found by the original authority, we cannot
deny the benefit of the Notification. However, keeping in mind,
the other issues raised by the Learned Advocate for the
appellants as regard the eligibility, we do not arrive at any
finding thereon since, we are intending to remand these
matters back to the Original authority to determine and grant
the credit, if gray fabrics were received by the processors and
thereafter sent for job work of bleaching and mercerizing even
without physical receipts and bleached and mercerized fabrics
were thereafter received back for further processing. The
objection of cotton fabrics not being mentioned in Notification
No. 214/86 and the procedure for Job working not being
intimated and permission taken are not issue in which the
benefit of job work could be denied, following the decisions in
the case of———————.”
From the above finding of tribunal it is clear that the tribunal has
given direction to verify the facts that Appellants have received grey
fabrics or not if received grant the benefit of notifications. However
ongoing through the finding of both adjudicating authority and
documents submitted by the appellants we find that appellants have
failed to produce authentic documents regarding the receipts of
grey fabrics. No original copies of bills/ invoices and transport
documents related to the receipts of grey fabrics are available with
any of the appellant.
6.1 Further, ongoing through the relevant Explanation of the
Notifications we find that it has been expressly provided therein that,
where processed fabrics itself is used as an input for further processing
then, the provisions of the notification are not applicable.
6.2 We find that the denial of deemed credit to the appellants by
the lower authorities in absence of the proper documentary
evidence appears to be prima facie correct. However, to meet the
end of justice, we are of the view that one more opportunity can be
given to the appellants for production of all the documents which
prove that they had received the grey fabric and consequently
eligible to deemed credit.
- In view of the above discussion and finding, we are of the
view that the matter may be reconsidered once again. Accordingly,
the impugned orders are set aside. The appeals are allowed by way
of remand to the adjudicating authority.
(Pronounced in the open court on 25.01.2023)
(RAMESH NAIR)
MEMBER (JUDICIAL)
(RAJU)
MEMBER (TECHNICAL)
Leave a Reply