ORDER
S.L. Peeran, Member (J)
1. All these appeals arise from the respective OIOs confirming demands in the manner indicated in the impugned order.
2. The appellants are engaged in the manufacture of Cotton Yarn falling under Chapter Heading 5205.11 and 5205.19 of CET Act, 1985 at their factories at Kirikera and Kotnur. These units are Registered as Unit ‘A’ and Unit ‘B’. The appellants contend that almost 75% of the single yarn manufactured by the appellants at both the units is cleared by them on payment of duty for sale. The remaining 25% of the single yarn is cleared to their own units, known as Unit ‘D’ and Standard General Finance Ltd. for the purpose of undertaking the processes of doubling, gassing, reeling, mercerising etc. The yarn after being subjected to the above processes, is received back in its entirety by the sending unit (subject to the invisible losses) packed in cartons and thereafter cleared for export under bond or on payment of duty in the domestic market. They were availing the facility of procedure prescribed under Rule 96E of CE Rules which permitted the removal of cotton yarn without payment of duty for further processing. On 1-7-2001, the new Central Excise (No. 2) Rules, 2001 came into force. The said Rules did not contain any provision similar to Rule 96E of the erstwhile CE Rules, 1944 as it stood prior to 1-7-2001. However, the appellants continued to follow the procedure of the erstwhile Rule 96E and simultaneously made representations to the Government for continuing the facility available to them under Rule 96E of the erstwhile Rules. In the meanwhile, the appellants had also filed documents in the form of AR-3 As/challans that was used under Notification No. 214/86-CE. However, the department issued Show Cause Notices for the respective dealer and confirmed the same on the ground that the appellants were not eligible to claim the benefit under erstwhile Rule 96E of the CE Rules. The appellants’ contention is that the Revenue considered the representations and have issued Section 11C Notification No. 21/2005-CE (N.T.) dated 3-5-2005 holding that duty of excise payable on the said cotton yarn in various forms falling under the Chapter Heading 52, removed from one factory to another for the purpose of further processing shall not be required to be paid in respect of such cotton yarn on which the said duty of excise was not being levied during the aforesaid period in accordance with the erstwhile procedure followed by them. Their further contention is that 85% of the yarn sent to the job workers for further processing has been exported and the terms of Rule 19(2) of CE Rules would be applicable and no duty demand can be made. In this regard, they rely on the judgment rendered in the case of Kansal Knitwears v. CCE, Chandigarh – 2001 (136) E.L.T. 467 (Tri.-Del.) and the Constitutional Bench judgment of the Apex Court rendered in the case of Thermax Private Ltd. v. CC – and that of the Mangalore Chemicals & Fertilizers Ltd. v. DC – . Their further contention is that provisions of Rule 96E continues in Central Excise Rules, 2001. The last ground taken is that the entire demand is revenue neutral and rely on the judgment of the Apex Court rendered in the case of (i) Amco Batteries Ltd. v. CCE – 2003 (153) E.L.T. 7 (S.C.); (ii) CCE v. Mahindra & Mahindra – ; (iii) Jay Yuhshin Ltd. v. CCE, New Delhi – .
3. The learned SDR fairly conceded that Section 11C Notification exempts the appellants from paying duty.
4. On a careful consideration, we notice that the Government has issued Section 11C Notification and the said Notification reads as follows:
“Notification No. 21/2005-C.E. (N.T.) dated May 3, 2005
Whereas the Central Government is satisfied that a practice was generally prevalent regarding levy of duty of excise (including non-levy thereof) under Section 3 of the Central excise Act, 1944 (1 of 1944) (hereinafter referred to as the said Act), on cotton yarn in various forms falling under Chapter 52 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), removed from one factory to another for the purpose of processing and that such cotton yarn was liable to duty of excise which was not being levied according to the said practice during the period of commencing on the 1st July, 2001 and ending with 24th March, 2003.
2. Now, therefore, in exercise of the powers conferred by Section 11C of the said Act, the Central Government hereby directs that the duty of excise payable on the said cotton yarn in various forms falling under the said heading, removed from one factory to another for the purpose of further processing, but for the said practice, shall not be required to be paid in respect of such cotton yarn on which the said duty of excise was not being levied during the aforesaid period in accordance with the said practice :
Provided that exemption contained in this notification shall be applicable only if the processed cotton yarn has been accounted for and disposed of in accordance with the Central Excise law.”
5. In view of this, we clearly hold that duty is not demandable in the present case. Furthermore, we also see that the appellants’ contention that they have cleared the goods from one unit to another and demands are not enforceable as the goods had been exported is also well taken ground in terms of the submissions made and the judgments cited by them. In view of the stated position, the impugned order is set aside and the appeals are allowed with consequential relief, if any.
(Operative portion of this Order was pronounced in open Court on conclusion of hearing)