2002 (1) TMI 356 - AT - Central Excise

Summary

Issues: Application for waiver of pre-deposit of Central Excise duty and penalty. Interpretation of whether the manufactured yarn qualifies as sewing thread. Time-barred demand for duty. Eligibility for exemption under specific notifications.

Interpretation of whether the manufactured yarn qualifies as sewing thread:
The case involved an application by a factory for waiver of pre-deposit of Central Excise duty and penalty. The factory argued that the yarn they manufactured, rewound from hanks and cones to tubes, did not qualify as sewing thread under the Central Excise Tariff. The factory's advocate highlighted that the Chemical Examiner's report did not confirm the yarn was dressed for use as sewing thread, a crucial condition as per Note 3 to Section XI of the Tariff. The Commissioner (Appeals) also acknowledged the absence of this detail in the report. The advocate contended that without evidence of the yarn being dressed for sewing thread use, it should not be classified as such. Additionally, the factory claimed the demand was time-barred as the show cause notice was issued after a significant delay following the initial investigation.

Time-barred demand for duty:
The factory argued that the demand for duty was time-barred since the officers visited their premises in 1995, but the show cause notice was issued in 1998, well beyond the statutory time limit. They asserted that as the investigation was completed before the first notice, there was no justification for the delayed issuance of the subsequent notice in 1998. This raised a significant procedural issue regarding the timeliness of the demand for duty.

Eligibility for exemption under specific notifications:
The factory also claimed eligibility for exemption under Notification No. 35/95-C.E., dated 16-3-95, as amended by Notification No. 84/95 dated 18-5-95. This exemption was crucial in determining the factory's liability for Central Excise duty. The advocate argued that the factory met the conditions for exemption, further complicating the assessment of duty liability.

Decision:
After considering the arguments from both sides, the Tribunal found merit in the factory's contention regarding the absence of evidence that the yarn was dressed for use as sewing thread, a key requirement for classification. Consequently, the Tribunal set aside the recovery of the entire amount of Central Excise duty and penalty during the appeal's pendency. The case was scheduled for final hearing on 30-1-2002, indicating a temporary relief granted to the factory pending the final decision.