[Order per : P.G. Chacko, Member (J)]. - The appellants imported silk yarn and silk fabric from China and filed 44 bills of entry during the period from February, 2007 claiming the benefit of Notification No. 30/2004-C.E., dated 9-7-2004 (as amended) in respect of Additional Duty of Customs (countervailing duty). The benefit was denied and CVD was demanded. The first appellate authority also held against the assessee. Hence the present appeal.
2. After examining the records and hearing both sides, we note that the classification of the imported items is not in dispute. The yarn was classified under Heading 5004 00 90 and the fabric under Heading 5007 20 90. Both these entries in the Schedule to the Central Excise Tariff Act carried a rate of duty of 8%. The above notification (as amended)granted exemption from payment of duty of excise on all goods falling under Headings 5004 to 5007 of the CETA Schedule, subject to a condition as stated in the proviso to the notification. This proviso reads thus : “provided that nothing contained in this notification shall apply to the goods in respect of which credit of duty on inputs has been taken under the provisions of the Cenvat Credit Rules, 2002.” Before the lower authorities, the question arose as to whether the importer had complied with the above condition for the purpose of claiming exemption from payment of CVD on the silk yarn and fabric imported by them, on the strength of the above notification. The assessee, in their appeal filed against the decision of the original authority, submitted before the Commissioner (Appeals) that the above condition did not apply to them inasmuch as the input for yarn was not chargeable to duty of excise in India and, by reason thereof, the input for fabric was also not dutiable. In this manner, it was contended that the above proviso to the notification was not applicable. This argument has been reiterated before us by the learned counsel for the appellants. The learned counsel has also relied on the Board’s Circular No. 26/2004-Cus., dated 31-3-2004 as also on the decision of this Bench in Dhana Exim v. Commissioner of Customs, Chennai [ (Tri.-Chennai)]. The learned JDR relies on the Tribunal’s larger Bench decision in Priyesh Chemicals and Metals v. Commisisoner of Central Excise, Bangalore [ (Tri.-LB)] and submits that a similar condition attached to the exemption notification considered by the larger Bench was held to be applicable to the goods imported by the party.
3. After considering the submissions, we are of the view that the instant case needs to be examined without reference to other notifications but only with reference to the specific terms of the subject notification. We have already reproduced the relevant condition attached to Notification No. 30/2004-C.E. ibid. Admittedly, both the yarn and fabric are eligible for exemption from payment of duty of excise under the above notification subject to the above condition. The question now arises as to whether this condition works in relation to the goods imported by the assessee. Incidentally, it has been pointed out by the learned counsel that this is a condition which does work in relation to a large number of goods mentioned in the Table annexed to the notification. However, according to the learned counsel, the condition is unworkable in relation to silk yarn and fabric. It has been submitted that raw silk/silk filament, which is a natural product, is the input for silk yarn and the same is not chargeable to duty of excise (the Tariff provides ‘nil’ rate of duty for raw silk). On this basis, it is submitted that the question of a manufacturer of silk yarn availing Cenvat credit on input does not arise and, to this extent, the condition attached to the notification is irrelevant. It is further submitted that, for the silk fabric, the input is silk yarn, which is also claimed to be not chargeable to duty of excise by virtue of the above notification. Both parties agree that when silk yarn was imported during the material period no CVD was required to be paid in terms of Notification No. 20/2006-Cus., dated 1-3-2003. Accordingly it is argued that there is no question of any manufacturer of silk fabric in India availing Cenvat credit on his input viz. silk yarn. In this view of the matter, the demand of CVD on yarn and fabric is challenged.
4. We have found a formidable point in the submissions of the learned counsel. It has been established that, during the period of dispute, an Indian manufacturer of yarn or fabric would not have been required to claim Cenvat credit on his input. In other words, there was no question of such manufacturer availing input-duty credit, the input being not chargeable to duty of excise. In this view of the matter, the demand of CVD on the yarn and fabric imported by the appellants is not sustainable in law. The impugned order is set aside and this appeal is allowed.
(Dictated and pronounced in open Court)