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TMI Blog2023 (12) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of concessional rate of duty under Notification No. 8/97-CE dated 01.03.1997 and during the period from 01.04.2003 to 31.03.2005, appellant have cleared open end yarn to DTA by availing the benefit of concessional rate of duty under Sr. No. 3 of Notification No. 23/2003-CE dated 31.03.2003. Both the Notifications are pari materia and provide effective rate of duty on goods cleared by 100% EOU in DTA as equivalent to normal rate of Excise Duty payable by any non-EOU unit. However, the benefit of the said notifications were available subject to the conditions that the goods cleared in DTA shall be manufactured wholly out of indigenous raw materials. A search was carried out at the premises of the appellant by the preventive team of the Central Excise officers on the pretext that the appellant were wrongly availing the benefit of concessional rate of duty in respect of their finished goods. After the detail investigation appellant was issued show cause notice dated 31.05.2005 proposing to demand of Central Excise Duty of Rs. 1,15,34,689/- on clearances of ring spun yarn to DTA during the period April 2000 to November 2001 on the ground that they had wrongly availed benefit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tands satisfied by the appellant. 2.1 He also submits that in the present case, emergence of cotton waste during the manufacturing of ring spun yarn is inevitable because it is not possible to manufacture desired quantity of ring spun yarn with lessor quantity of raw cotton with zero waste. Ld. Commissioner in the impugned order erred in arriving a finding that concept of technological necessity cannot be applied to cotton waste. Cotton waste so generated in form of short fiber etc. is used by the appellant to manufacture open end cotton yarn. Cotton waste if cleared as such in DTA is specifically exempted under Notification No. 23/2003-CE. This is because purpose of exemption will be frustrated if waste is made dutiable which emerges inevitably in the manufacturing process of ring spun yarn. The technique to manufacture open end yarn is different from ring spun yarn. Thus, the entire quantity of imported raw cotton/locally procured raw cotton has been used in the manufacture of ring spun yarn and generation of cotton waste in the manufacturing process is inevitable. Cotton waste thereafter is used in manufacturing of open end yarn and it would be incorrect to say that raw cotton ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ye Chemical Vs. CCE, Bombay -1995 (75) ELT 721 (SC) * Tamil Nadu Housing Board Vs. Collector -1994 (74) ELT 9 (SC) * Cadila Laboratories Pvt. Ltd. Vs. CCE - 2003 (152) ELT 262 (SC) * Continental Foundation Joint Venture Holding, Naphtha H.P. Vs. CCE, Chandigarh - I -2007 (216) ELT 177 (SC) 3. On the other hand, Shri Rajesh Nathan Learned Assistant Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the adjudicating authority. 4. We have carefully considered the submission of both the sides and also perused the records. We find that the main issue involved in the present matter is whether the appellant a 100% EOU is eligible for benefit of exemption available under Notification No. 8/97-CE dated 01.03.1997 and Notification No. 23/2003-CE dated 31.03.2003 to pay duty on DTA clearance of 'Open End Yarn'. We think it is necessary to first extract the relevant notification insofar as they have a bearing on the facts of the present case. The Notification is reproduced below: "Notification : 8/97-C.E., dated 01-Mar-1997 "In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tigation Shri Jitendra Pagaria, Deputy Manager (Commercial) of the appellant in his statement explained that waste cotton used by them for manufacture of Open End Cotton Yarn. Further the investigation report dated, 10.03.2007 of Commissioner (Investigation) also provide the production process of appellant as under: Production Process : The applicant produces: 1) 100% Ring Spun Cotton yarn from cotton at ring spinning section and 2) Open End Yarn from the waste of Cotton generated. Waste generated out of ring spinning yarn is used as raw materials for manufacturing open end yarn. 4.3 From the above fact, it is clear that appellant has manufactured Ring Spun Yarn and Open End Yarn. The Ring Spun Yarn was manufactured out of imported raw cotton as well as locally procured raw cotton and in the process of production of the same, cotton waste was generated. The open end cotton yarn was manufactured from cotton waste. The sole basis on which the exemption is sought to be denied by the revenue is that Open End Yarn cleared in the DTA is produced out of the cotton waste allegedly arose of the imported cotton. Whereas we find that the Notification only provides that finished goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f duty of excise on excisable goods at the rate prescribed for levy of duty of excise on excisable goods at the rate prescribed in the Central Excise Tariff Act, 1985. Where the goods are covered by CETA the same are excisable goods within the meaning of Section 2(d) of the Act. This equally applies to goods manufactured by or in an EOU. Goods manufactured by or in an EOU are also chargeable to duty of excise under Section 3 of the said Act, and therefore 'excisable goods' within the meaning of Section 2(d) of the Act. Since the cotton waste is covered by the heading 5202 of CETA, the same is 'excisable goods' even when the same arises and is generated in an EOU. It therefore, also follows that when further goods are manufactured out of such cotton waste, which is an indigenous product, such further goods viz. Open End Yarn in this case, shall be goods which are manufactured wholly out of indigenous raw material and therefore, eligible for the benefit of the Notification. Clearly, in the present matter revenue has failed to consider the provisions of Section 2(d) and Section 3 of the said Act and erred in holding that cotton waste is not manufactured product. 4.6 We also find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ER-2 Returns available on record. The format of ER-2 Returns specified by the Central Government shows that details of manufacture and clearance of goods of the concerned month are to be declared at Clause (iii) of the Returns and all the relevant details like description of goods, classification number of the goods, unit of quantity etc. along with the quantity of each of the goods manufactured and the quantities of physical export as well as the value of physical export, deemed export and also the quantities of each of the goods cleared in DTA in terms of quantity as well as value have been shown in the Return. Under Clause 4A of the Returns, details of clearances in DTA and deemed export and duty payable are to be disclosed and the excise notification availed along with serial number in the excise notification are also required to be submitted under Clause 4A of the Return. It is not the case of the Revenue that the respondents failed to declare the details and information required under ER-2 Returns and it is also not the case of the Revenue that any information declared under ER-2 Returns was wrong or false. On the other hand, we find that the details like total quantity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limitation for the 100% EOU was also considered in the case of Commissioner of Central Excise, Pune-I v. Emcure Pharmaceuticals Ltd. - 2014 (307) E.L.T. 180 (Tri. - Mumbai) wherein, the Tribunal has passed the following order : "5. We have carefully considered the submissions made by both the sides. From the records, it is clearly seen that the respondent had declared to the department that they would be availing the benefit of Notification No. 23/2003 in of advance DTA sales to be effected by them in terms of the permission granted by the Development Commissioner as early as in 2004 itself. Therefore, the respondent cannot be, said to have withheld any information from the department. The respondent's plea that they were entitled for the benefit of exemption under Notification No. 23/2003 under the belief that they were entitled for benefit of such Notification cannot be said to be a mis-declaration as held by the Hon'ble Apex Court in Northem Plastics Ltd. v. Collector of Customs & Central Excise - AIR 1998 SC 2371 = 1998 (101) E.L.T. 549 (S.C.). If the department felt that the respondent was not entitled to such exemption, they should have issued the show cause notice within ..... X X X X Extracts X X X X X X X X Extracts X X X X
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