2007 (2) TMI 420 - AT - Central Excise

Issues:
1. Classification of intermediate product - nylon twine under Chapter Heading 5607.90.
2. Eligibility for duty exemption under Notification No. 6/2002.
3. Classification and exemption under Notification No. 30/04 dated 9-7-2004.
4. Time bar on demand due to suppression of facts.
5. Declaration of denierage of yarn and its implications.

Analysis:

1. Classification of Nylon Twine:
The dispute arose regarding the classification of nylon twine by the applicant under Chapter Heading 5607.90. The department contended that as per Section Note 12 of Section XI of the Central Excise Tariff Act, yarn of less than 9000 deniers cannot be considered as twine. Consequently, the department issued three show cause notices demanding duty amounting to Rs. 2,10,34,659 for the period from September 2002 to August 2005.

2. Eligibility for Duty Exemption under Notification No. 6/2002:
The applicant claimed exemption under Notification No. 6/2002 for the intermediate product, nylon twine, cleared under full exemption of duty. However, a clarification by the Central Board of Excise & Customs stated that nil payment of duty does not amount to payment of appropriate duty. As a result, the exemption under the notification was denied, leading to the demand for duty.

3. Exemption under Notification No. 30/04 dated 9-7-2004:
The applicant argued for exemption under Notification No. 30/04 dated 9-7-2004 for the nylon monofilament yarn procured from outside and used in the manufacturing process. The Commissioner denied the exemption, citing that the notification barred taking credit of duty paid on inputs, implying that duty should have been paid on the inputs for the exemption to apply. The applicant contended that the absence of duty payment on inputs should not disqualify them from the exemption.

4. Time Bar on Demand:
The applicant claimed that the demand prior to 9th July 2004 was time-barred as there was no suppression of facts to evade duty. They argued that they had consistently declared the denierage of the yarn in their RT 12 returns since 1985. The extended period for demand could not be invoked based on the assertion that the applicant had not suppressed the fact regarding the denierage of the twine.

5. Declaration of Denierage of Yarn:
The Revenue contended that the applicant should have made a specific declaration that the denierage of their yarn was less than 9000. However, the Tribunal found that the applicant had declared the denierage of the yarn in their RT 12 returns, fulfilling the requirement under Section Note 3 of Section XI of the Central Excise Tariff Act. The Tribunal held that the Revenue should have ascertained the denierage over the years and could not allege suppression of facts by the applicant.

In conclusion, the Tribunal held in favor of the applicant, granting a complete waiver of duty and penalties imposed, and stayed the recovery of the same until the disposal of the appeals.

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