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TMI Blog2023 (10) TMI 167X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 31.03.2003 and thus, entitled for exemption? b) Whether the assessee rightly availed exemption under Notification No. 53/97 dated 03.06.1997 & Notification No. 52/03- Cus dated 31.03.2003 on the portion of imported Cotton contained in Cotton Waste which is subsequently cleared at NIL rate of duty, under Notification No. 6/97-CE dated 01.03.1997 & Notification No. 23/03-CE dated 31.03.2003?" Central Excise Appeal No. 29 of 2020 2. The facts of the case lie in a narrow compass, which are as follows - The assessee is a manufacturing unit operating as a 100% Export Oriented Unit (EOU)" under the EXIM policy. It was issued a Letter of Permission (LOP) by the jurisdictional Development Commissioner for the manufacture of cotton yarn. 3. The case of the revenue is that during excise audit of the assessee, it was noticed that the assessee had removed waste cotton generated during the course of manufacture of cotton yarn at "nil" rate of duty under Notification no. 1/95-CE dated 4 January, 1995 and Notification no. 22/03-CE dated 31 March, 2003 on the issue of domestic procurement of raw materials and consumables and Notification No. 53/97-Cus dated 3 June, 1997 and Notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of excise leviable thereon under section 3 of Central Excise Act, 1944. This is in view of the decision of the Constitution Bench of the Hon'ble Supreme Court in Commissioner of Central Excise, Vadodara vs. M/s. Dhiren Chemicals Industries 2002 (139) ELT 3(SC). The revenue thus forming an opinion that when no duty was paid on such resultant article (including rejects, wastes and scrap material arising in the course of manufacture of such articles) owing to the reason that such resultant articles were exempted or were chargeable to duty at NIL rate, the condition "on payment of duty of excise leviable thereon" under Section 3 of Central Excise Act, 1944 was not satisfied. It is on such premise, a show cause notice dated 11 September, 2007 came to be issued to the assessee to show cause as to why the exemption availed by the assessee under the said notification on the portion of imported Cotton contained in Cotton waste ought not to be denied and appropriate central excise/customs duty should not be demanded and recovered from the assessee. The relevant part of the show cause notice is required to be noted, which reads thus: "a) the exemption availed by the assessee under Notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firmed, and an order in regard to payment of interest and penalty was passed against the assessee. The operative part of the Order-in-original reads thus: "ORDER (i) I confirm the duty demand amounting to Rs. 1,17,63,618/- (Rupees One Crore Seventeen Lacs Sixty Three Thousand Six Hundred Eighteen Only), payable by the assessee. This amount should be recovered from M/s. Technocraft Industries (India) Ltd. I also order the enforcing of B-17 Bond executed by them for this purpose. (ii) I hereby order the payment of interest at appropriate rate, on the above said amount of Rs. 1,17,63,618/- (Rupees One Crore Seventeen Lacs Sixty Three Thousand Six Hundred Eighteen Only), and order for its recovery from the date of importation/procurement till the date of payment of duty from M/s. Technocraft Industries (India) Ltd. (iii) I hereby impose a penalty of Rs. 1,17,63,618/- (Rupees One Crore Seventeen Lacs Sixty Three Thousand Six Hundred Eighteen Only) under Section 112(a) read with Section 72 of the Customs Act, 1962 on M/s. Technocraft Industries (India) Ltd." 7. Being aggrieved by the Order-in-Original, the assessee filed an appeal before the Commissioner (Appeals), Central Exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remanded to the CESTAT. It is next contended that the CESTAT could not have placed reliance on the decision of the Tribunal in Winsome Yarns Ltd. vs. Commissioner of Central Excise, Chandigarh 2001 (127) ELT 833 (Tri-Del) when the decision of the Supreme Court in M/s. Dhiren Chemical Industries (supra) was squarely applicable. It is next contended that the decision of the Madras High Court in HGL Trading vs. Union of India 2016 (331) ELT 651 (Mad.) also has not been appropriately considered by the CESTAT in allowing the assessee's appeal. 10. On the other hand, learned counsel for the assessee would support the impugned order. She would submit that the contention as urged on behalf of the revenue ought not to be accepted inasmuch as such contentions do not consider that the assessee's unit is an export-oriented unit and that the Notifications in question were squarely applicable warranting payment of Nil duty. She has drawn our attention to the Notifications No. 52/2003 dated 31 March, 2003, being a Notification - General Exemption No. 46 providing that the assessee's unit was exempted from the whole of the duty of customs leviable under the First Schedule to the Customs Tariff Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise Tariff Act) specified in the corresponding entry in column (2) of the said Table, produced or manufactured in an export oriented undertaking or an Electronic Hardware Technology Park (EHTP) Unit or a Software Technology Park (STP) Unit and brought to any other place in India in accordance with the provisions of (Foreign Trade Policy) and subject to the relevant conditions specified in the Annexure to this notification, and referred to in the corresponding entry in column (5) of the said Table, from so much of the duty of excise leviable thereon under Section 3 of the Central Excise Act as specified in the corresponding entry in column (4) of the said Table. Sr.No. Chapter or heading No. sub-heading No. Description of goods Amount of Duty Conditions 1 .. .. .. .. 2 .. .. .. .. ... 15 52.02 Cotton waste (including yarn waste and garnetted stock) In excess of "Nil" .. 13. Further, subsequent Notification No. 52 of 2003 dated 31 March, 2003 under the Customs Tariff Act is also required to be noted, which reads thus: "GENERAL EXEMPTION NO. 46 Exemption to specified goods imported or procured from Pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) dated the 15th July, 1998 or No. 46/2001 Central Excise (N.T.) dated the 26th June, 2001 or cleared to the warehouse authorized to carry out manufacturing process or other operation under section 65 of the Customs Act, 1962 (52 of 1962) and under the Manufacture and Other Operations in Warehouse Regulation, or cleared to organizations which are entitled for duty free import of such goods in terms of the exemption notification." 14. Also cotton waste being excisable was classified under Heading no. 52.02 under Chapter 52 of the Central Excise Tariff Act 2001-2002 at Nil Page 12 of 17 rate of duty. It thus appears that on clear application of Notification No. 23/2003-CE dated 31 March, 2003 as also Notification No. 52/2003-Cus dated 31 March, 2003, the cotton waste as generated in the assessee's unit and as cleared in the domestic tariff area, although excisable fell under the category of Nil duty. 15. The CESTAT, in our opinion, was thus correct in observing that when a manufacturer sets out to produce waste which is only incidentally generated in the process of manufacture of finished goods, the law would regard such waste as excisable goods, however, being exempted by applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the appropriate amount of duty of excise has already been paid" in favour of the revenue. However, it held that regardless of the interpretation placed by it on that phrase, if there were circulars which had been issued by the Central Board of Excise and Customs which placed a different interpretation upon that phrase, that interpretation would be binding on the Revenue. It is not disputed that there are circulars issued by the Central Board of Excise and Customs which place a different interpretation upon that phrase and which apply to the facts of these two appeals. For that reason, these appeals are dismissed. No order as to costs." The aforesaid observation of the Supreme Court further makes it clear that the reliance placed by revenue on Dhiren Chemicals Industries (supra) even otherwise would be misplaced in the facts and circumstances of the case, this more particularly, as in the present case, there were clear notifications under which the amount of excise duty on cotton scrap was nil. 18. In view of the above discussion, we are unable to persuade ourselves to agree with the submission of the learned counsel for the revenue that the findings of the Tribunal in rega ..... X X X X Extracts X X X X X X X X Extracts X X X X
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