Gowri Shankar, Member (T):— The Appellant-company is engaged in the manufacture of polyester yam (POY). It applied, in May, 1992, to the Assistant Collector, for permission to remove the POY under sub-rule (2) of Rule 57F to its factory at Naroda, Gujarat for texturising and on such texturising to be cleared from that factory. The Assistant Collector, in the same month, granted permission. Appellant thereafter cleared the texturised yam without payment of duty, and removed it to its factory at Naroda, where it was texturised. The bulk of such texturised yam exported about 85% was under bond without payment of duty. Remaining portion was cleared on payment of appropriate duty for home consumption. By letter dated 4th December, 1992, the Assistant Collector informed the appellant that since the tariff entry in which polyester yam fell was not specified in the Table to the Notification 211 of 1986, none of the provisions of rule relating to Modvat would apply to these goods. Therefore, the permission under sub-rule (2) to Rule 57F was not valid and was withdrawn. Following this withdrawal, a notice was issued to the appellant to show cause why duty should not be recovered and a quantity of POY removed without payment of duty between 5th June, 1990 to 31st December, 1990. In the order impugned in the appeal, the Collector has held that permission could not have been granted under sub-rule (2) to Rule 57F since the POY was not an input specified in the notification. Therefore, permission was outside the purview of the Modvat Rules. He therefore, confirmed the demand for duty. Hence this appeal.

2. Advocate for the appellant raised the following contentions: When the appellant asked for permission for removal of goods under sub-rule (2) to Rule 57F, the Department has been aware that the POY was not a notified input. Despite this, however, the Department granted the permission. Therefore, removal of goods without payment of duty during the period when the permission granted was in force cannot be questioned following the cancellation of the permission. The decisions of this Tribunal in Himadri Electrical Pvt. Ltd. v. C.C.E, 1987 (29) E.L.T 140, and C.C.E v. Shri Bagavathi, 1997 (92) E.L.T 240 are cited in support. It is next contended that duty structure was such that duty was payable only on the POY, and texturised yam manufactured out of duty paid POY was from payment of duty. Therefore, if payment of duty, on the POY is now insisted upon, it would amount to double payment of duty in respect of that quantity of texturised yam which was cleared for home consumption. It is contended in this regard that both POY and texturised yam are notified under the provisions of Rule 56A. Apart from the benefit of the notifications, the provisions of Rule 56A would be available. This would again require that duty paid is only once and not at two stages.

3. A related argument raised is that goods which are exported are not required to pay duty. There is specific provision for clearance of these goods without payment of duty under Rule 12(a), and for rebate of duty if paid under Rule 12. Clause (c) of sub-rule (1) of Rule 13 allowed removal of excisable material without payment of duty for manufacture of export goods. According to these rules, finished excisable goods can be removed for export without payment of duty, against draw back of duty would be available in terms of Rule 12(a), on the duty paid on the raw materials used in the manufacture of the texturised yarn i.e POY. Even without application of this provision, by virtue of the provision of Rule 13(l)(c) duty is not payable on the POY which was texturised and exported.

4. Advocate for the Department contends that the permission granted under sub-rule (2) of Rule 57F was invalid when it was granted because of the fact that neither the raw materials nor finished product were notified under Rule 57F. It cannot, therefore, be argued that the permission was valid till it was cancelled. Withdrawal of such a wrongly granted permission does not amount to any review and it cannot be argued that the permission ceased to operate only when it was formally withdrawn. In any event, duty short-paid or not paid can be recovered independently in terms of sub-section (1) of section 11A. He cites the decision of the Supreme Court in LML Ltd. v. Union of India, 1987 (28) E.L.T 234 (S.C). He contends that in addition to its own manufacture, the appellant has been clearing through import quantities of POY, some of which had not paid any duty, having been imported under advance licences under the DEEC Scheme. Therefore, if any, benefit is to be granted on the ground that the finished product has been exported, it is necessary to verify that such benefit does not extend to POY imported without payment of duty.

5. We first have to see whether notwithstanding the fact neither POY nor texturised yam were notified under Rule 57A, the grant of permission by the Department had the effect of restraining it from recovering duty for the goods cleared without payment in terms of that permission. It was not disputed that the goods not being notified such permission could not have been granted in accordance with law. In Himadri Electrical Pvt. Ltd. v. C.C.E, the facts before the Tribunal were briefly as follows: The assessee manufactured electric fans. He also manufactured rotors and stators parts used in manufacture of fans and for such manufacture obtained from the market duty paid electrical stampings and laminations, rotors and stators captively used in manufacture of fans were exempted from duty by Notification 28/69. By another notification duty paid on stampings and laminations could be set off against duty paid on rotors and stators. The assessee was permitted by the Assistant Collector to avail of the proforma credit of the duty paid on stampings and laminations to be used towards payment of duty of electric fans. Subsequently this permission was withdrawn on the ground that it was not according to law and the credit of the duty paid on stampings and laminations was disallowed. The correctness of this action was questioned before the Tribunal. The Tribunal noted that the assessee had voluntarily offered to pay duty on rotors and stators and again on regulators and fans, though no duty was payable on stators and rotors in view of Notification No. 28/69, and that it was only as a consequence of a trade notice that the appellant approached the Assistant Collector and obtained the orders. In the facts of that case the Tribunal held that the relief granted under permission would cease to be available only after it was withdrawn.

6. The background to the decision in C.C.E v. Shri Bagavathi Tea Estate was that assessee was given permission under Rule 56B to remove without paying duty tea emerging from the drier mouth to another factory and availed of this permission. Subsequently the Department held that the tea in question was not a semi-finished product and hence permission under Rule 56B which is limited to semi-finished product could not be granted, and duty was demanded on the tea removed. The Tribunal held that the tea was validly cleared by the assessee under the permission granted under Rule 56B since the Department itself had considered the tea to be a semi-finished product.

7. The facts before us are quite different. Here there is no question of any trade notice having been issued by the Department supporting the permission granted or conclusion by the Department as to whether a particular produce is semi-finished or not. The POY in question was quite clearly not an input under Rule 56A nor was texturised yarn finished product in terms of that rule. It cannot, therefore, be said that the permission granted was in accordance with the law or procedure understood by the Department, or based on the perception of the nature of such goods by the Department. It is settled that there can be no estoppel against law. The permission as granted is clearly contrary to law and the appellant cannot claim benefit of that permission.

8. We note that the Collector had declined to consider the question of availability of Rule 56A on the ground that, that was not the issue in the proceedings before him. The Collector was not right in refusing to consider this question. An assessee can raise the availability of a notification or of a particular procedure at any stage, the Collector was required to deal with this argument and give a folding.

9. The other arguments which were advanced before us were not advanced before the Collector, as is clear from the reply to the notice and the written submission. We have already observed that the Collector had erred in not considering extensive arguments raised in regard to the availability of Rule 56A and we are of the view that the Collector should give finding on this. In view of this we consider it appropriate for him to give a finding on its other arguments raised by the appellant before us.

10. In our view, it is not possible to avoid verification of certain factual aspects of the matter. If it is held that the benefit claimed by the advocate for the appellant is available (on which we expressed no opinion) it would, in any case, be limited to POY manufactured and cleared without payment of duty. Quantities imported under the DEEC scheme or otherwise without payment of duty will necessarily have to be excluded. This was one of the contentions raised by the advocate for the Commissioner. Further, co-relation is unavoidable to ensure that quantities of POY which were cleared without payment of duty were actually exported after being converted to texturised yarn. Therefore, co-relation between the POY cleared by the appellant and texturised yam which is claimed to have been manufactured out of that has to be undertaken. Further, it has also to be ensured that that quantity of texturised yam was exported or cleared on payment of duty. These matters would obviously have to be attended to at the field level.

11. Accordingly we set aside the order in appeal. The Commissioner shall hear the appellant and adjudicate the matter according to law.