RECRON SYNTHETICS LTD. Vs. CCE

JUDGEMENT

(1.) M /s. Recron Synthetics Learned have filed this Appeal against order in Appeal dated 410/2002 dated 27.8.2003. Shri B.L. Narasimhan, learned Advocate, submitted that the Appellants manufactured polyester partially oriented yarn, polyester textured yarn and polyester dyed yarn; that Polyester dyed yarn was exempted from payment of duty under Notification No. 8/96 -CE subject to the condition that dyed yarn was manufactured out of textured yarn or draw twisted yarn on which appropriate duty of excise has already been paid; that the said Notification was withdrawn with effect from 1.3.1997, on which date they were having a stock of 32.92 MT of dyed yarn in stock manufactured out of duty paid textured yarn; that the said quantity of dyed yarn was cleared by them without payment of duty; that the Assistant Commissioner under Order -in -Original No. 10/99 dated 22.3.1999 confirmed the demand of duty and imposed penalty; that the Commissioner (Appeals) under the impugned order set aside the demand for the period March, 1997 to October, 1997 being time barred; that however, he confirmed the demand for the period November, 1997 to March, 1998 and reduce the penalty to Rs. 20,000/ -; that the Commissioner (Appeals) also did not accept their contention that they were eligible to avail MODVAT credit of duty paid on Polyester textured yarn, dyes and chemicals used in the manufacture of Polyester dyed yarn which was cleared without payment of duty; that there is no dispute that they had paid duty on the textured yarn which in turn was used in the manufacture of dyed yarn in question; that the amount of duty paid by them on textured yarn is more than the amount of duty confirmed against them in respect of clearance of dyed yarn. Reliance has been placed on the decision in the case of Formica India v. Collector,, 1995 (77) ELT 511 (SC) and P.G. Foils Ltd. v. Commissioner of Central Excise,, 2000 (116) ELT 105. Finally, he mentioned that no penalty is imposable on the Appellants as the provisions of Rule 173Q were not invoked in the show cause notice.

(2.) COUNTERING the arguments Shri P.M. Rao, learned Departmental Representative submitted that once the duty of excise became payable on dyed yarn, the appellants were not required to discharge any duty liability on textured yarn as they could have availed the benefit of Notification No. 67/95 -CE. We have considered the submissions of both the sides. The facts which have not been disputed by the Revenue are that before 1.3.1997 dyed yarn was exempted subject to the condition that it should have been manufactured out of textured yarn on which appropriate duty of excise has already been paid. It has also not been disputed by the Revenue that when the Notification No. 8/96 was withdrawn with effect from 1.3.1997 the Appellants were having in their stock 32.92 MT dyed yarn. Once the dyed yarn has become dutiable, the Appellants have become eligible to avail of the MODVAT credit of the duty paid on the textured yarn which has been used in relation to the manufacture of dyed yarn. The question of availing of benefit of Notification No. 67/95 does not arise since the dyed yarn had already been manufactured before the withdrawal of the Notification and for the purpose of availing the benefit of Notification No. 8/96 the Appellants were required to pay the duty on textured yarn. In view of this, the Appellants could not have availed the benefit of Notification No. 67/95 before 1.3.1997 as during that period the dyed yarn was exempt from payment of duty. We, therefore, hold that the Appellants are eligible to avail of MODVAT credit of the duty paid on the inputs. It has been submitted by the learned Advocate for the Appellants that the amount of MODVAT credit available to them is more than the duty confirmed against them. In view of this, no penalty is also imposable. We accordingly, allow the Appeal.