COMMISSIONER OF C. EXCISE Vs. GTN TEXTILES LTD.

JUDGEMENT

(1.) THE Revenue is aggrieved with the Order -in -Appeal No. 12/2003 (H -I) (D) CE dated 25.4.2003. The Respondents are engaged in the processing of Cotton Yarn. They had two units located adjacent to each other. In the first unit, single yarn is manufactured and sent to the other unit under Rule 96E for the purpose of converting single yarn into doubled yarn. Doubling of yarn is one of the specified process under Rule 96E. After conversion into doubled yarn, the same is returned to the single yarn unit without payment of duty under the same Rule 96E for further activities like packing, etc. The doubled yarn is thereafter received back at the doubling unit from where it is exported on payment of duty. The respondents took credit of Rs. 12,20,400/ - being the duty paid on capital goods used in their doubling yarn and such credit was utilized for payment of duty on the goods exported. The credit so utilized was claimed back as rebate. The Department has issued a show cause notice proposing to disallow the credit availed on capital goods on the ground that the capital goods were used exclusively for conversion of cotton yarn into doubled yarn which was thereafter removed without payment of duty under the provisions of Rule 96E of Central Excise Rules. The Commissioner (Appeals) in the impugned order upheld the assessee's contention that the goods cleared from the assessee's unit under Rule 96E were exported on payment of duty and therefore, the credit cannot be denied in terms of Rule 57R which raises a bar only on goods which have not been cleared without payment of duty. The Revenue in this appeal contended that since the goods have been cleared on payment of duty to other unit, i.e. single yarn unit -1, but cleared nil rate of duty from doubling unit and both the units are different from the Central Excise purposes, the capital goods credit availed for the exclusive use of goods cleared at nil rate of duty is inadmissible. The learned DR argues on the basis of grounds made out in the appeal.

(2.) THE learned Counsel pointed out to the amendment in the Rule 57R which clearly held that the duty is payable under the rule, then they are eligible to take the credit.

(3.) ON a careful consideration of the matter, we notice that the bar in terms of Rule 57R applies only when the capital goods are used in the manufacture of final products which are exempted from the whole of duty of excise leviable thereon or chargeable to nil rate of duty. The clearance made by the assessee in terms of Rule 96E neither can be considered as exempted goods nor can they be considered as clearances chargeable as nil rate of duty. Rule 96E does not exempt or charge nil rate of duty on the goods cleared from one factory to another for processing. It only defers the payment of duty to the final stage. It is something on the same lines as a movement under Rule 57F (4) of the Central Excise Rules, 1944 as it stood then. As the goods have been cleared on payment of duty, therefore the availment of Modvat credit is in terms of law. It is an admitted position that the single yarn has been cleared without payment of duty for manufacture of double yarn which has been ultimately exported on payment of duty. The clearance of single yarn has to be considered to be on par with the clearances under bond. It is now settled that the clearance under export under bond cannot be considered as goods cleared by availing exemption at nil rate of duty as held in the case of Drug India Ltd. v. CCE and CCE v. Alpha Drug India Ltd. . The Tribunal in the case of CCE v. Natco Pharma Ltd. has upheld the availment of credit on goods exported. This judgment has been affirmed by the Apex Court as reported in 2005 (186) ELT A210. We do not find any infirmity in the Impugned order and the same is legal and proper. There is no merit in the appeal and the same is rejected.