2008 (6) TMI 404 - AT - Central Excise

Summary

Issues:
Claim for nil rate of duty under Notification No. 6/2002 for blended yarn - Composition of yarn as 70 : 30 in the invoice - Eligibility for exemption - Interpretation of blend percentage - Intent of parties - Tolerance limit of blend percentage - Precedents supporting exemption claim.

Analysis:

The appellants, engaged in manufacturing yarn and fabrics, sought exemption under Notification No. 6/2002 for blended yarn with polyester and cotton. The dispute arose as the invoice indicated the blend as 70 : 30, potentially exceeding the 70% polyester limit for exemption. A show cause notice challenged their eligibility based on this composition discrepancy.

The appellant contended that despite the 70 : 30 blend mentioned, the intention was to clear yarn with less than 70% polyester, supported by the buyer's excise-free requirement and lab tests showing compliance. However, both the original and appellate authorities denied exemption due to the blend declaration in the invoice.

During the hearing, the appellant presented evidence including purchase orders, lab reports, and industry standards allowing a tolerance of +/- 3% in blend composition. Citing precedent, they argued that exceeding the blend ratio did not automatically disqualify them from exemption.

In its analysis, the Tribunal acknowledged the usual rule barring exemption due to the 70 : 30 blend declaration. Yet, considering the unique circumstances, such as the clear intent to claim exemption, tests conducted before the notice, and the cooperative nature of the buyer, the Tribunal found in favor of the appellant. Emphasizing the genuine intent and the actual blend percentage being compliant, the Tribunal allowed the appeal, recognizing the parties' awareness of the exemption criteria.

In conclusion, the Tribunal's decision to grant exemption was based on the specific facts of the case, highlighting the importance of intent, compliance with blend requirements, and the cooperative nature of the buyer. The judgment underscored the significance of genuine intentions and actual composition over technical discrepancies in blend ratios for claiming exemptions under the relevant notification.