2003 (7) TMI 421 - AT - Central Excise

Issues Involved:
1. Whether the demand for duty from M/s. Super Associates for the period 23-2-94 to 25-5-95 is sustainable.
2. Eligibility for exemption under Notification No. 35/95.
3. Applicability of the larger period for invoking time-bar due to alleged misstatement or suppression of facts by the appellants.

Issue-wise Detailed Analysis:

1. Demand for Duty from 23-2-94 to 25-5-95:
The Tribunal noted that the Commissioner had initially confirmed the demand for duty on M/s. Super Associates, but this was challenged on the grounds that "doubling of yarn" did not amount to manufacture until the Finance Bill of 1995. The Tribunal's remand order had previously held that the Commissioner erred in confirming the duty for the period before the introduction of Tariff Note (3) to Chapter 54. Upon re-examination, the Commissioner accepted that Note (3) to Chapter 54 was introduced on 26-5-95, making the demand from 23-2-94 to 25-5-95 unsustainable.

2. Eligibility for Exemption under Notification No. 35/95:
The Tribunal's remand order had directed the Commissioner to reconsider the eligibility for exemption under Notification No. 35/95, specifically whether the intermediate product, "fabric," was subject to duty. The Commissioner, in the impugned order, referred to the Apex Court's judgment in Filterco & Anr., which held that non-woven compressed woollen felts are not 'fabrics' due to their lack of pliability. Despite the intermediate product being a base fabric, the Commissioner concluded that the ultimate product, "felt," lacked the characteristics of a fabric, thus failing to qualify for the exemption. However, the Tribunal noted that the Commissioner misinterpreted the judgments, particularly the distinction made in the Porritts & Spencer (Asia) Ltd. case, which recognized "dryer felts" as textiles. The Tribunal held that the appellants were eligible for the benefit of Notification No. 35/95 until the Board's circular dated 19-4-96 clarified that intermediate products must be duty-paid to satisfy the notification's requirements.

3. Applicability of the Larger Period for Time-bar:
The Tribunal examined whether the larger period for invoking time-bar due to alleged misstatement or suppression of facts was applicable. The Commissioner had acknowledged the appellants' correspondence with the department, including letters dated 25-11-91, 9-3-93, and 1-4-94, which were replied to by the department on 25-1-96. The Commissioner introduced a new ground of misstatement in the impugned order, which was not part of the show cause notice. The Tribunal found no evidence of suppression or misstatement, as the department had been fully aware of the facts through the appellants' correspondence. The Tribunal concluded that the demands were barred by time, and the appellants were not liable to pay duty or penalties.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeals with consequential relief. The demands for the period 23-2-94 to 25-5-95 were unsustainable, the appellants were eligible for exemption under Notification No. 35/95 until the Board's circular dated 19-4-96, and the larger period for time-bar was not applicable due to lack of suppression or misstatement of facts.

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