2005 (9) TMI 399 - AT - Central Excise

Summary

Issues:
1. Short levy of duty on texturised synthetic yarn due to non-payment of duty on base yarn.
2. Calculation of duty based on assumed loss of base yarn.
3. Contention regarding incorrect assumption of loss.
4. Confirmation of duty demand by Assistant Collector.
5. Appeal against the duty demand rejection.
6. Duty payment based on approved classification lists.
7. Exemption of waste yarn under Notification No. 130/77.
8. Lack of factual basis for duty demand.
9. Limitation period for raising duty demand.
10. Interpretation of tariff heading for duty calculation.
11. Assessment of duty payable on waste yarn.

Analysis:
1. The appellant, a manufacturer of texturised synthetic yarn, faced a duty demand of about Rs. 6 crores for the period from 1-3-75 to 30-4-77 due to alleged short levy of duty on the base yarn used in manufacturing texturised yarn. The duty calculation was based on an assumed loss of 6.5% of base yarn during texturising.

2. A corrigendum later revised the duty amount to about Rs. crore and clarified that 93.5 kg of textured yarn would be produced from 100 kgs of base yarn, with the basis of demand being the assumed loss of 6.5% of base yarn. The appellant contested this assumption as incorrect and excessive.

3. The Assistant Collector upheld the duty demand, citing that the process of texturising yarn results in a waste of not less than 6.5%. The appellant's appeal against this decision was rejected, leading to the current appeal.

4. The appellant argued that the duty on textured yarn should be based on the duty leviable on base yarn, which was already paid at the time of removal of textured yarn. They also highlighted that waste yarn was exempt under Notification No. 130/77, thus no duty demand should be raised for assumed or real waste.

5. The appellant further contended that the duty demand lacked factual basis and was merely an assumption without support from practical experience or technical literature. They also raised the issue of limitation, stating that the demand made beyond the normal period of limitation without evidence of intent to evade duty was unjustified.

6. During the proceedings, the appellant referenced a previous Tribunal decision where duty demand on waste yarn was deemed unsustainable. The Revenue, however, argued that duty on textured yarn from non-duty paid base yarn should include the duty on base yarn plus an additional amount per kg.

7. The Tribunal focused on whether duty was payable on waste yarn, concluding that the duty demand was not sustainable as waste yarn was exempt during the relevant period. Therefore, the appeals were allowed, and the impugned order was set aside in favor of the appellant.