Deepak Processors VERSUS C.C.E. & S.T.-Rajkot

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.

  1. 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.

  1. 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

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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)

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