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Judgment
H.N. Devani, J.—In these appeals u/s 35G of the Central Excise Act, 1944 (the Act), Appellant-revenue has challenged consolidated order dated 4th June 2009 made by the Customs, Excise and Service Tax Appellate Tribunal (the Tribunal) [2009 (244) E.L.T. 138 (Tribunal)], proposing the following two questions:
[1] Whether, in the facts and circumstances of the case, the Hon''ble Tribunal has rightly come to the conclusion that Rule 4(5)(a) of the Rules provides for facility of exemption from payment of duty on the goods at the time of clearance from the job worker''s premises even in absence of corresponding exemption notification exempting such goods from payment of duty on clearance from factory gate?
[ii] Whether, in the facts and circumstances of the case, the Hon''ble Tribunal is correct in holding that the requirements of the provisions of Rule 4(5)(a) of the CENVAT Credit Rules, 2002/2004 were duly fulfilled?
On 28-4-2010, this Court had passed the following order in each of the appeals:
[1] Heard Mr. R.M. Chhaya, learned Senior Standing Counsel for the Appellant-revenue.
[2] It is submitted that while passing the impugned order, the Tribunal failed to consider the provisions of Rule 3 of the CENVAT Credit Rules, 2004 as well as amended Notification No. 26/2004 dated 9-7-2004.
[3] Hence, issue Notice for final disposal returnable on 16th June 2010.
Direct service is permitted.
In response to the notice, the Respondents have put in appearance and are represented by learned advocate Mr. B.L. Narasimhan.
Heard the learned advocates for the respective parties.
Admit. The following substantial question of law arises for consideration:
Whether the Customs, Excise & Service Tax Appellate Tribunal was justified in passing the impugned order merely by placing reliance upon various decision of the Tribunal without properly adverting to the facts of the case and without discussing as to what was the ratio laid down in the said decisions and as to how the said decisions were applicable to the facts of the present case?
The Respondent in Tax Appeal No. 173 of 2010, Shri Hari Textiles Pvt. Ltd. (hereinafter referred to as M/s. Shri Hari) is engaged in manufacture of Polyester Texturised Yarn and Grey Fabrics falling under Chapter No. 54 & 58 of the Central Excise Tariff Act, 1985 and holding Central Excise registration in respect of the same. The said Respondent is also availing benefit of CENVAT Credit under CENVAT Credit Rules, 2002/2004. A team of officers visited the premises of M/s. Shiri Hari and carried out preventive checks on 19/20-2-2005 on the basis of information that M/s. Shri Hari was evading central excise duty by indulging in clearance of excisable goods, viz. Polyester Textured Yarn falling under Chapter No. 5402.32 of the Central Excise Tariff Act, 1985 without payment of central excise duty. It was noticed that M/s. Shri Hari had manufactured and cleared polyester textured yarn classifiable under Chapter 5402.32 of the Central Excise Tariff Act, 1985 on job work, to M/s. Rapier Manufacturing Company (I) Pvt. Ltd. (M/s. Rapier) without payment of duty of excise and without preparing and issuing central excise invoices upto 23-11-2004. By virtue of budgetary changes made in the financial year 2004-05, the manufacture of filament yarn classifiable under Chapter 5402.32 of Central Excise Tariff, on job work had been excluded from the purview of Notification No. 214/86-C.E., dated 25-3-1986 as amended by Notification No. 26/2004-C.E., dated 9-7-2004. Despite the fact that manufacture and clearance without payment of central excise duty on such polyester textured yarn classifiable under Chapter Heading No. 5402 was not permissible under the Central Excise Act, 1944 and the notifications issued thereunder, M/s. Shri Hari was receiving POY, on job work, for texturising the same and polyester textured yarn manufactured out of the said POY was cleared by M/s. Shri Hari to M/s. Rapier without payment of duty due thereon and without issuance of central excise invoices. Simultaneous checks were also carried out at M/s. Rapier and it was noticed that M/s. Rapier had sent POY to M/s. Shri Hari for coversion into Polyester Textured Yarn on job work basis under challans as per Rule 4(5)(a) of the CENVAT Credit Rules, 2002/2004 and received back the Polyester Textured Yarn without cover of invoices or without payment of duty. M/s. Rapier adopted this practice till 17-11-2004 and thereafter, Polyester Textured yarn was received from M/s. Shri Hari under cover of invoices on payment of duty. A show cause notice, therefore, came to be issued calling upon the M/s. Shri Hari proposing to recover duty of excise as well as proposing penalty against other Respondents under Rule 26 of the Central Excise Rules, 2002 with interest, as detailed in the show cause notice. Vide order dated 9th January 2007 made by the Commissioner, Central Excise & Customs, the duty as well as the penalty proposed, came to be confirmed. Being aggrieved, the Respondents carried the matter in appeal before the Tribunal. The Tribunal vide the impugned order has allowed the appeals and granted consequential relief to the Respondents.
Subsequently, the Respondents had moved an application for rectification of mistake before the Tribunal, which came to be allowed vide order dated 25th August 2009.
Mr. R.M. Chhaya, learned Senior Standing Counsel for the Appellant-revenue has submitted that the Tribunal has erred in comparing Notification No. 241/86 with the procedure of Rule 4(5)(a) of the CENVAT Credit Rules, 2002, holding that the same are similar and not different from each other, inasmuch as both these notifications and rules allowed movement of goods for job work. It is submitted that the scope of both the provisions is totally different inasmuch as Notification No. 214/86 exempts the job workers from duty liability on the job work and allows clearance of goods from the job workers premises without payment of duty. On the other hand, Rule 4(5)(a) allows the principal manufacturer to avail of CENVAT credit on the inputs sent to the job workers, if the goods are received back in the factory, after job work, within 180 days of their being sent to the job worker. It is submitted that the Tribunal has, without noticing the distinction between the two provisions, blindly followed certain decisions cited on behalf of the Respondents and has held in favour of the Respondents without so much as discussing as to what was the ratio laid down in the said decisions and as to how the same were applicable to the facts of the present case.
On the other hand, the learned advocate for the Respondent has supported the impugned order of the Tribunal and has submitted that the order of the Tribunal is in consonance with the provisions of law and as such, does not warrant interference.
As can be seen from the impugned order of the Tribunal, the Tribunal has recorded the following findings:
[3] We have considered the submission by both the sides and perused the records. In this case, the Appellants manufacture PTY following the procedure prescribed under CCR. In this connection, it is to be mentioned that procedure prescribed under Notification No. 214/86 and Rule 4(5)(a) of CCR are not very different from each other. There is no dispute that the raw materials were sent under challan and finished products were returned to the principal. There is also no dispute that the principal had paid duty on the finished product. In these circumstances, the requirement of provisions of Rule 4(5)(a) of CCR have not been fulfilled. We also find that the Tribunal''s decisions cited by the learned Advocate are relevant and in the case of Sunflag Filaments Ltd. (supra), it was clearly observed that in the absence of amendment of Rule 4(5)(a) of CCR, which excluded PTY form following the procedure, the Assessee cannot be prevented from availing this facility and, therefore, the clearance cannot be held as irregular.
[4] In view of the above position, we find that the clearance of PTY have to be held as regular. Once the clearance are held to be regular and it is held that no duty is payable, the penalty imposed on the Appellants and confiscation etc. are also to be set aside. Accordingly, we allow all the appeals with consequential'' relief to the Appellants.
Thus, the Tribunal has observed that the procedure prescribed under Notification No. 214/1986 and Rule 4(5)(a) of the CENVAT Credit Rules are not very different from each other, without even adverting to the fact as to at which stage and to whom, Notification No. 214/1986 and Rule 4(5)(a) of the CENVAT Credit Rules would be applicable. The Tribunal has merely noted that the decisions cited by the learned advocate are relevant, without so much as a whisper as to how the same are relevant to the facts of the present case. The Tribunal has further observed that, "In the case of Sunflag Filaments Ltd. (supra), it was clearly observed that in the absence of amendment of Rule 4(5)(a) of CCR, which excluded PTY from following the procedure, the Assessee cannot be prevented from availing this facility and, therefore, the clearance cannot be held as irregular." On a plain reading of the aforesaid observation of the Tribunal, it is difficult to comprehend as to which is the procedure which is being referred to by the Tribunal and which facility can the Assessee be not prevented from availing.
Thus, its apparent that the impugned order of the Tribunal does not reflect as to what was the controversy which the Tribunal was called upon to decide; what was the ratio laid down in the decisions referred to by the Tribunal and as to in what manner the said decisions were applicable to the facts of the case. The Commissioner in his order dated 9th January, 2007 and more particularly in paragraphs No. 25.4 to 25.7 thereof, has given detailed reasons as to why Rule 4(5)(a) would not be attracted insofar as the question as to whether a job worker manufacturer is required to pay any duty or not is concerned. The Tribunal, in the impugned order, has not assigned any reasons as to how the findings and conclusions recorded by the Commissioner are erroneous and has blindly followed the decisions cited by the learned advocate for the Respondents without so much as considering as to how they were applicable to the facts of the present case.
In Commnr. of Central Excise, Bangalore Vs. Srikumar Agencies etc. etc., , the Apex Court has held thus:
[4] Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of Courts are neither to be read as Euclid''s theorems nor as provisions of the statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated, judgments of Courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into length discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments.
The Court further held that since the factual position has not been analysed in detail, disposal of appeals by mere reference to decisions was not the proper way to deal with the appeals. The Court also observed that the CEGAT had not dealt with the decision on which strong reliance had been placed by the learned Solicitor General and accordingly, set aside the impugned orders of the Tribunal and remitted the case to the Tribunal.
In the light of the aforesaid, the impugned order passed by the Tribunal cannot be sustained. The question stands answered accordingly.
For the foregoing reasons, the appeals are allowed. The impugned order dated 4th June, 2006 made by the Tribunal is hereby quashed and set aside. Appeals No. C/358 to 363 of 2007, are hereby restored to the file of the Tribunal. The Tribunal shall decide the same afresh in accordance with law after giving the parries an opportunity of hearing. It would be open for the parties to raise all contentions before the Tribunal. It is further clarified that nothing stated in this order shall be construed as an expression on the merits of the case.