The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that Cenvat credit is available for clearance of dyed yarn if excise duty paid at the doubling stage.
M/s Shree Rishabh Polyester, aggrieved by order for recovery of ₹ 1,41,391 under section 11A of Central Excise Act, 1944, along with interest thereon under section 11AB of Central Excise Act, 1944, for having claimed the benefit of notification no. 6/2002-CE dated 1st March 2002, restricting liability to ₹ 9 per kg as Cenvat and ‘additional excise duty’ to 15% thereon instead of Cenvat at 16%, ‘special excise duty’ of 16% and ‘additional excise duty’ at 15% thereon, on clearance of ‘dyed yarn’ without complying with condition therein and imposition of penalty of ₹ 5000 under rule 27 of Central Excise Rules, 2002, preferred appeal before the first appellate authority.
The Counsel for the appellant submitted that the continuity of the dispute after 2nd December 2016 is attributable only to unforeseen error inasmuch as the appeal had been listed along with others, viz., that of M/s Shreekar Polyester Pvt Ltd and M/s Raj Synthetics, that had arisen in identical circumstances but, in the order of the Tribunal disposing those off, the reliefs sought in their appeal had not been dealt with. It was contended that, as the same circumstances inform this dispute, the reasoning in that decision should apply here.
The Authorized Representative submitted that the facts differed in the present matter inasmuch as the finished goods had not been manufactured from duty paid ‘textured yarn’ or ‘draw-twisted yarn’ but from ‘twisted yarn’ emerging as an intermediate product on which duty liability had not been discharged and thus not compliant with condition.
A Two-Member Bench comprising CJ Mathew, Technical Mathew and Ajay Sharma, Judicial Member observed that “Hence subject to condition that yarn emerging therefrom is exempted from duty, it is only required that the finished goods should have been manufactured either out of duty paid ‘textured yarn’ or ‘twisted yarn’ and that Cenvat Credit on such inputs had not been availed. It is not the case of Revenue that credit had been availed.”
The Bench relied on the decision in re Shreekar Polyester Pvt Ltd, wherein it was observed that “the appellants contended that even if the duty is paid at the doubling stage, Cenvat credit can be availed for clearance of dyed yarn and in effect there would be revenue neutrality. In these circumstances, the appellant’s interpretation of condition 19(ii) appears to be correct.”
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