ORDER
Jyoti Balasundaram, Vice President
1. The appellants herein are engaged in the manufacture of Nylon Fishing Nets falling under Chapter Heading 56 to the Schedule to the Central Excise Tariff Act, 1985 and were procuring nylon multi- filament yarn of 210 deniers for the manufacture of such goods. The final product is made out of nylon twine which is obtained by twisting and turning the nylon filament yarn so procured. The demand in the present case is on nylon twine which was classified by the appellants under CET sub-heading 5607.90 and cleared under exemption from payment of duty in terms of Notification No. 6/2002 CE dated 1.3.2002 as per sr.No. 142 of the table to the Notification. For the period subsequent to 9.7.2004, the appellants had cleared nylon twine availing exemption in terms of Notification 30/04 as per sr.No. 6 of the table to the Notification. According to the Revenue, the benefit of exemption under Notification 6/2002 was not available to the product in dispute for the reason that filament yarn of 210 deniers (input for the manufacture of nylon twine) was fully exempted from duty and therefore, it was not an item on which credit could have been taken and therefore, they had not fulfilled condition No. 34 which is required to be fulfilled in respect of sr.No. 142 of the table to the notification, as the condition is that exemption is available to nylon twine if made from yarn, monofilament, tapes or strips which has discharged appropriate duty of excise leviable under the First Schedule, the special duty of excise leviable under the Second Schedule or, as the case may be, the additional duty leviable under the Customs Tariff Act, 1975. As regards Notification No. 30/2004, the case of the department is that the appellants are hit by proviso to the Notification which stipulates that nothing contained thereunder shall apply to the goods in respect of which credit of duty on inputs or capital goods has been taken under the provisions of the Cenvat Credit Rules, 2002 and since filament yarn of 210 deniers was exempted from payment of duty, the question of taking or not taking credit on such item did not arise. In other words, the provision was interpreted by the department to mean that the goods should be duty paid for taking credit but credit should not have been taken if the manufacturer wished to avail benefit of exemption under this Notification. The extended period of limitation has been applied against the appellants in both the cases.
2. We have heard both sides.
3. We find force in the submission of the appellants that the benefit of exemption in terms of Notification No. 30/04 with effect from 9.7.04 can not be denied to them for the reason that the product in question viz. nylon twine has been manufactured out of monofilament / multi-filament yarn on which undisputedly no credit of duty has been taken. The language of the Notification does not lend itself to the interpretation of the Revenue viz. that the inputs should be duty paid. The only condition in the proviso is that no credit of duty on the inputs used in the manufacture of the goods for which the benefit of the Notification is being claimed, should be taken. Since admittedly, no credit was taken on the inputs used for the manufacture of nylon twine, there is no valid reason for disallowing the benefit of exemption in terms of Notification No. 30/04. We, therefore, hold that the benefit of exemption in terms of Notification No. 30/04 is admissible to the disputed product manufactured by both the appellants for the period subsequent to 9.7.04.
4. As regards the period prior to the issue of Notification 30/04 (relevant Notification is 6/02-CE) we do not see any force in the submission of the appellants that credit is admissible to them in view of the language of Condition No. 34 which is applicable in respect of sr.No. 142 of the table to the Notification which covers all goods falling under Chapter Heading 56.07 other than clipped cord (it is no one’s case that the goods are dipped cord). Condition No. 34 provides that inputs should be duty paid. Since the nylon filament yarn of 210 deniers which is used as inputs by the appellants for manufacture of nylon twine is exempted from payment of duty, Condition No. 34 does not stand fulfilled and therefore the benefit in terms of Notification No. 6/02 at sr.No. 142 of the Table thereto is not admissible to the appellants. However, we find prima facie force in the plea that the demand raised by denial of benefit of Notification No. 6/02 is barred by limitation. The show cause notices in the case of Garware Marine Ind. Ltd. are dated 2.1.06, 5.1.06 and 20.2.06 and they cover the period from Sept.2002 to August, 2005. The demand by denying the benefit of Notification 6/02 would cover the period upto 8.7.04. The notices are therefore, beyond the statutory period of limitation of one year. Neither appellant can be held guilty of suppression so as to invoke the extended period of limitation against them. In the case of Garware Marines Ind. Ltd. we accept the contention of the appellants, on the perusal of the records, that they declared the denierage of the nylon filament yarn which was used by them as input in the manufacture of nylon twin. Therefore, the finding of the Commissioner that the department was not made aware of the denierage of the product is not factually correct, since M/s. Garware Marine Ind. Ltd. had declared the denierage of their product (from which it was clear that the input was nylon filament yearn of 210 denier). In the case of the other appellant M/s. Sunkiran Synthetics, we find that no denierage of the input yarn was declared. There was no mis-declaration of the denierage. There was no positive assertion on the part of M/s Sunkiran Synthetics that the denierage of the input was above 210 in order to mislead the department that the input yarn was not exempted from payment of duty. Further, we find that the classification of nylon twine falling under Chapter Heading 5607 has all along been accepted even during the period when Chapter Note stipulated that yarn of denierage below 9000 will not fall under Chapter Heading 56.07 as the understanding was that the appropriate duty paid on the inputs will include nil duty also and it is only after a clarification by the Apex Court in its decision in Dhiren Chemicals, holding that nil duty payment is not payment of duty at appropriate rate, that the show cause notice came to be issued for the period subsequent to the date of the clarification. In this view of the matter, no charge of suppression can be leveled and upheld against the appellants. In the result, we hold as under:
(a). The product in dispute is eligible for exemption in terms of Notification No. 30/04 dated 9.7.04.
(b) The benefit of exemption in terms of Notification No. 6/02 is not available to the product in dispute for the period prior to 9.7.04.
(c) The demand for the period prior to 9.7.04 is barred by limitation.
5. In the light of the above, we set aside the demands confirmed and penalties imposed upon the appellants herein and allow the appeals.