SRF LTD. Vs. CCE

JUDGEMENT

(1.) M /s. SRF Ltd. (Appellants) are manufacturers of Nylon Filament Yarn and Nylon Tyre Cord Fabrics. In the impugned order, they were directed to pay duty of Rs. 60,15,625/ - on 250 MTs of nylon yarn captively consumed by them and duty of Rs. 10,50,000/ - on equal quantity of nylon tyre cord fabrics cleared to M/s. Apollo Tyres Ltd., Perambra during the period 5.11.1991 to 29.11.1991. The order was passed by the Commissioner of Central Excise pursuant to the Tribunal's remand order No. 1341 and 1342/98 dated 16.7.1998, wherein it had been observed that the Commissioner's earlier order had travelled beyond the scope of the show -cause notice resulting in miscarriage of natural justice.

(2.) M /s. Apollo Tyres Ltd., holders of advance licence issued under Rule 191BB of the Central Excise Rules, 1944, had permission from the Assistant Collector of Central Excise, Trichur Division vide his letter dated 7.10.1991 to procure 250 MTs of nylon yarn from the appellants subject to the conditions laid down in Notification No. 33/90 -CE (NT) dated 5.9.1990. In the said letter, the Assistant Collector had also permitted M/s. Apollo Tyres Ltd. to get nylon yarn processed into tyre cord fabric on job work basis, subject to confirmation by the Collector of Central Excise, Cochin. On this basis, the appellants applied to the Assistant Collector of Central Excise, Madras - III Division for permission to undertake the job work of processing nylon yarn into nylon tyre cord fabric and to clear the fabric to M/s. Apollo Tyres Ltd. without payment of duty. Considering the permission dated 7.10.1991 given to M/s. Apollo Tyres Ltd. by the Assistant Collector, Trichur, the Assistant Collector of Central Excise, Madras vide letter dated 31.10.1991 granted permission to the appellants to clear 250 MTs of nylon yarn, without payment of duty, to M/s. Apollo Tyres Ltd. The appellants cleared 250 MTs of tyre cord fabrics [converted from 250 MTs of nylon yarn], without payment of duty, to M/s. Apollo Tyres Ltd. However the permission dated 7.10.1991 granted to M/s. Apollo Tyres Ltd. by the Assistant Collector, Trichur was withdrawn with immediate effect vide letter dated 6.1.1992. In the wake of this development, the Central Excise authorities at Madras treated the permission dated 31.10.1991 of the Assistant Collector of Central Excise, Madras given to the appellants, as null and void and issued a show -cause notice to the appellants demanding duty on the nylon yarn cleared for captive consumption and the tyre cord fabric cleared to M/s. Apollo Tyres Ltd. It was in adjudication of this notice that the Commissioner passed the impugned order.

(3.) AFTER examining the records and hearing both sides, we find that, during the period of dispute [5.11.91 to 29.11.1991], M/s. Apollo Tyres Ltd. were entitled to receive nylon yarn, without payment of duty, from the appellants under Rule 191BB read with Notification No. 33/90 -CE (NT) dated 5.9.1990. For this purpose, they had the requisite permission from the Assistant Collector of Central Excise, Trichur. On the strength of this permission, the Assistant Collector of Central Excise, Madras had permitted the appellants to clear 250 MTs of nylon yarn without payment of duty to M/s. Apollo Tyres Ltd., subject to condition that the procedure laid down under Rule 191BB read with Notification No. 33/90 -CE(NT) shall be followed. The Revenue has no case that the appellants did not follow the said procedure during the material period. The sole ground on which the appellants are asked to pay duty on the goods is that the permission granted to M/s. Apollo Tyres Ltd. by the Assistant Collector of Central Excise, Trichur was withdrawn. We have perused the letter dated 6.1.1992 issued by the Assistant Collector of Central Excise, Trichur to M/s. Apollo Tyres Ltd. This letter says that the permission granted in letter dated 7.10.1991 under Rule 191BB is withdrawn with immediate effect. Obviously, the permission granted by the Assistant Collector in his letter dated 7.10.1991 under Rule 191BB was not withdrawn with retrospective effect. During the period of dispute, M/s. Apollo Tyres Ltd. had valid permission from their Assistant Collector of Central Excise for procuring 250 MTs of nylon yarn, without payment of duty, from the appellants. The latter had also permission from their Assistant Collector to clear the said quantity of nylon yarn to the former. The withdrawal of permission by the Assistant Collector of Central Excise, Trichur vide his letter dated 6.1.1992 did not affect the transaction already concluded between the appellants and M/s. Apollo Tyres Ltd. under valid permission of the respective central excise authorities. Both parties followed the procedure laid down under Rule 191BB r/w Notification No. 33/90 -CE (NT), Hence the demand of duty raised on the appellants in respect of the nylon yarn cleared by them to M/s. Apollo Tyres Ltd. cannot be sustained. There is no justification for the demand of duty in respect of nylon tyre cord fabrics either. This item cleared by the appellants to M/s. Apollo Tyres Ltd. was admittedly used by the latter in the manufacture of tyres, which were admittedly exported in discharge of export obligation under the advance licence (DEEC). On these facts, the demand raised on the appellants in respect of the nylon tyre cord fabrics is also unsustainable.