Nill Rate of Additional Excise Duty applicable on the day of clearance for yarn

The CESTAT, Ahmedabad has ruled that the effective NIL rate of Additional Excise Duty (AED) on the day yarn was cleared for sale is applicable for calculating AED. This decision overturned a demand for AED on yarn manufactured before a notification that removed the duty. The tribunal clarified that while goods were taxable at the time of manufacture, the rate applicable for duty calculation is determined by the clearance date.

The CESTAT, Ahmedabad in the case of M/s. Emtee Poly Yarn Pvt. Ltd. v. C.C.E. & S.T. VAPI [Excise Appeal No. 11418 of 2014 dated September 11, 2023] allowed the appeal and set aside the demand, holding that the effective NIL rate of Additional Excise Duty ("A.E.D.") on the day of clearance would be applicable for the purpose of calculation of A.E.D. 

Facts

M/s. Emtee Poly Yarn Private Limited ("the Appellant") manufactured yarn in 2004. Manufacturing goods were subject to A.E.D.under the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978. However, as per Notification No. 31/2004 dated July 9, 2004, the A.E.D. on textiles were dispensed with. However, the Revenue Department ("the Respondent"), stated that thedate of manufacturing goods would be relevant in determining the levy of Excise Duty. Therefore, the Department raised a demand for payment of A.E.D. on goods produced before the enactment of the Notification.

Thereafter, the Respondent vide OIA-VAP-EXCUS-000-APP-492-13-14 dated February 12, 2014,("the Impugned Order") upheld the demand raised, for payment of A.E.D. by the Appellant. 

Aggrieved by the Impugned Order, the Appellant filed an appeal before the Tribunal. 

Issue

Whether the effective rate of A.E.D. on the day of clearance or manufacturing would be applicable for calculating A.E.D. to be levied?

Held

The CESTAT, Ahmedabad in Excise Appeal No. 11418 of 2014, held as under:

• Relying upon the judgement of the Hon’ble Supreme Court in Collector ofCentral Excise, Bombay v. Polyset Corporation[Civil Appeal Nos. 4574-75 of 1989 dated October 26, 1999], observed that the levying of Duty would be decided by the date of manufacturing of goods and the rate on which the Duty has to be levied would be decided on the basis of the relevant date of clearance.
• Noted that, the goods were taxable on the date on which the said goods were manufactured. However, on the date of clearance, the effective rate of A.E.D. was "Nil". Therefore, on the date of clearance, a "Nil" rate of A.E.D. would be applicable on the goods cleared. 
• Held that, the Demand raised by the Respondent is not sustainable, Hence, the Appeal is allowed.