Excise Duty On Branded Readymade Garments

The Mumbai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that no excise duty on branded readymade garments manufactured before 01.03.2011.

The bench of Suvendu Kumar Pati (Judicial Member) and Anil G. Shakkarwar (Technical Member) has observed that the goods were manufactured before 28.02.2011 and the branded readymade garments were brought into central excise levy with effect from 01.03.2011. Central excise duty is on manufacture. The collection of duty is deferred from the point of incidence till the goods are cleared from the factory for the purpose of administrative convenience.

Background

The appellant/assessee is in the business of manufacturing of branded readymade garments. The same were exempted from payment of central excise duty through a notification bearing No. 30/2004-CE dated 09.07.2004. The notification was amended through Notification No.12/2011-CE dated 01.03.2011 by which the branded readymade garments became leviable to central excise duty.

After the goods were brought into levy of central excise duty, on 04.03.2011, appellant registered themselves with Central Excise Department. On 26.04.2012 appellant was issued with a show cause notice stating that during the course of scrutiny of ER-1 returns filed by the appellant for the months of April, May June and July 2011, it was observed that the appellant had effected clearance of branded readymade garments without payment of central excise duty. Therefore, enquiries were initiated.

Appellant mentioned the details of the goods which were manufactured before 28.02.2011 and informed that the said goods were cleared during the months of April to July 2011 and since they were manufactured before issue of Notification No.12/2011-CE dated 01.03.2011 they did not pay any central excise duty.

Excise Duty On Branded Readymade Garments

The show cause notice was issued to the appellant demanding central excise duty in respect of goods that were cleared by the appellant without payment of duty during the months of April 2011 to July 2011 which were claimed by the appellant of having been manufactured before 28.02.2011 when there was no levy of central excise duty on branded readymade garments.

On contest, the said show cause was adjudicated. The original authority has taken date of removal into consideration and not the date of manufacture and confirmed the demand and imposed penalty.

The appellant preferred appeal before the Commissioner (Appeals) who did not interfere with the original order.

Arguments – Excise Duty On Branded Readymade Garments

The assessee contended that the goods which were manufactured before 28.02.2011 were divided into two groups. One group was cleared on payment of duty of Rs.2,11,576/- during the month of March 2011. Subsequently the appellant filed application for refund of the duty paid, which was rejected by the original authority and ultimately the matter was carried before this Tribunal which was decided through final order No. 87076/2023-CE dated 01.11.2023 and further stated that ultimately this Tribunal through the said final order had directed to pay the refund holding that there was no authority to levy duty and, therefore, eligibility for refund was upheld.

The appellant has submitted that the other group is subject matter of this appeal and on the similar grounds the goods which are subject matter of appeal are also not required to be subjected to levy of central excise duty in view of the fact that they were manufactured before the date on which levy of central excise duty was extended to branded readymade garments.

The assessee contended that goods were manufactured before introduction of levy and, therefore, did not attract central excise duty.

Conclusion – Excise Duty On Branded Readymade Garments

The tribunal while allowing the appeal held that the goods were not leviable to central excise duty in terms of exemption Notification No.30/2004-CE dated 09.07.2004.