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2016 (8) TMI 128 - SC - Central ExciseWhether market purchase goods can be treated as duty paid goods - manufacture of knitted or crocheted fabrics of cotton - benefit of concessional rate or nil rate of duty to the knitted garment manufacturers allowed on certain conditions - Notification No. 14/02-CE and 15/02-CE both dated 01.03.2002 - divergent view is taken by the different Benches of the Tribunal. - One of the conditions is for full exemption is that knitted garments are exempt if manufactured out of knitted fabrics on which appropriate duty of excise has been paid and no cenvat credit of duty paid on inputs or capital goods has been taken. If Cenvat credit is taken, the duty is at concessional rate. - Held that:- A reading of the Budget Explanatory Note makes it clear that those who did not want to avail MODVAT facility were allowed to clear the goods without payment of any excise duty. It is in this context that the authorities were asked not to insist upon any documentary proof for payment of duty and this was transported into the notification, in the form of Explanation II. It, therefore, becomes clear that when Explanation II states that the duty shall be deemed to have been paid even without production of documents evidencing payment of duty thereon, it was clearly meant that no duty was required to be paid by the manufacturers of knitted garments. Such an intention is clearly reflected in the Government's own Budgetary Notes extracted above. We, thus, hold that Explanation II to the said exemption Notification Nos. 14/2002 and 15/2002 create legal fiction and that was the precise purpose for which this explanation was added. It is trite law that a fiction created by a provision of law is to be given its due play and it must be taken to its logical conclusion. It would be pertinent to mention here that Condition No. 3 which uses the words “read with any notification for the time being in force” was put in place to overcome the interpretation that was given by this Court in Dhiren Chemical Industries case. Benefit of exemption notification would be available to all these assessees. - Decided against the revenue.
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