Excisable goods which are Exempted and Cleared for home consumption without Excise duty payment are Not Entitled to Get Benefit under Exemption Notification: CESTAT [Read Order]

The Chandigarh bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that restriction under Exemption Notification will apply if the excisable goods that are exempted or charged to nil rate of duty are cleared for home consumption without payment of duty. 

Paliwal Overseas Pvt. Limited, the appellant assessee was purchasing grey Yarn, and the part of the yarn used to be sent to another manufacturer to dye the dyed yarn was used in the manufacture of Handloom Durries and Rugs, and the same attracting nil rate of duty. 

The assessee appealed against the order passed by the Commissioner (Appeals) for confirming the demand of duty amounting to Rs. 1,59,75,117/- on the dyed yarn and imposition of penalty of equivalent amount under Section 11AC of Central Excise Act,1944 read with Rule 25 of Central Excise Rules, 2002. 

Dinesh Verma and Sagar Verma, the counsels for the assessee contended that all job workers of the assessee were recorded by the customs officers and all the job workers admitted that they were doing manufacturing/dyeing on job work for the assessee and grey yarn was sent to them by Paliwal Overseas Pvt. Ltd. on challans and that the yarn was got dyed by them from other firms and the final goods/dyed yarn was sent to the assessee. 

Rajeev Gupta and Aneesh Dewan, the counsels for the department contended that since the final product manufactured by the assessee attracted nil rate of duty, the assessee was not eligible for the benefit of Notification No. 67/95-CE and therefore, Central Excise duty on the intermediate goods, i.e. dyed yarn was required to be paid by the assessee. 

The Bench observed that restriction under notification No. 67/95-CE will apply if the excisable goods that are exempted or charged to nil rate of duty are cleared for home consumption without payment of duty. In such a situation the manufacturer will not be eligible for the benefit of this notification in respect of intermediate products coming into existence. 

The two-member bench comprising S S Garg (Judicial) and Anjani Kumar (Technical) held that since the entire quantity of goods manufactured was exported and clearances cannot be considered as clearance for home consumption , thus the assessee was eligible for the benefit under the notification.

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