2003 (9) TMI 626 - AT - Central Excise

Cenvat/Modvat - Texturised yarn of polyesters - Independent texturiser - Demand and penalty - Limitation

Summary

Issues:
1. Availment of credit on POY and its admissibility.
2. Classification of the appellants as independent texturisers.
3. Duty liability on twisted yarn and textured yarn.
4. Recovery of credit and imposition of penalties.

Analysis:
1. The dispute revolved around the appellants' availing of credit on POY and its admissibility. The Department alleged that the appellants, as independent texturisers, were not eligible for input credit on PTxY, leading to a demand for recovery of the credit taken on POY. The appellants argued that they were engaged in the manufacture of twisted yarn as well, and hence, not solely independent texturisers. The Tribunal found that the appellants' registration certificate did not conclusively establish them as independent texturisers, as it also mentioned twisted yarn, leading to a rejection of the Department's claim.

2. The issue of classification as independent texturisers was crucial in determining the duty liability on PTxY. The Department contended that the appellants fell under the category of independent texturisers as per Rule 57AB(2)(c), thereby disallowing the credit on POY. However, the Tribunal observed that the appellants were engaged in both texturising and twisting activities, making them ineligible for the classification of independent texturisers. The Tribunal highlighted that the appellants' main process was twisting, and they could not be denied the benefit of a notification available to them.

3. The duty liability on twisted yarn and textured yarn was a significant aspect of the case. The Department demanded duty payment on twisted yarn, arguing that it should be treated as a reversal of credit availed on POY. The Tribunal referred to relevant case laws to support the contention that the duty paid on twisted yarn could be considered a reversal of credit on POY. Additionally, the Tribunal addressed the duty payable on textured yarn for captive consumption, emphasizing that the duty paid on twisted yarn should be viewed in the context of the overall duty structure.

4. Regarding the recovery of credit and penalties imposed, the Tribunal scrutinized the Department's claims and penalties under Section 11AC. The Tribunal found that the demands raised did not warrant the imposition of penalties under Section 11AC, as the show cause notice was issued within the normal period of one year. Consequently, the Tribunal set aside the order and allowed the appeal in favor of the appellants, emphasizing the need for a comprehensive review of the issues raised and the legal implications involved.