2008 (7) TMI 756 - AT - Central Excise

Issues:
1. Exemption from duty under S.No.16B of Notification No. 4/97 for dyeing process without the aid of power or steam.
2. Interpretation of technical literature regarding dyeing process with steam and heat setting.
3. Purpose of heat setting in the manufacturing process.
4. Limitation period for raising demand and declaration of manufacturing process.
5. Quantity clearance without dyeing and discrepancies in invoices.
6. Penalty imposition for using steam in the dyeing process and declaration discrepancies.

Issue 1:
The appellants claimed exemption from duty under S.No.16B of Notification No. 4/97 for dyeing yarn without the aid of power or steam. However, the Revenue argued that passing the yarn through steam post-dyeing was integral to the process, making the exemption unavailable. The Commissioner (Appeals) upheld the demand of Rs. 6,25,497/-.

Issue 2:
The appellants argued that their dyeing process involved manual injection of colors without steam and that steam was used only for heat setting to remove twisting in the yarn. They contested the reliance on technical literature by the Commissioner (Appeals) to support the integral role of steam in dye fixation, emphasizing the manual dye injection process.

Issue 3:
The purpose of heat setting in the manufacturing process was debated, with the appellants asserting it was for dimensional stability and not dye fastness due to the yarn's low quality. They presented technical references to support their claim that heat setting was essential for yarn stability and not primarily for dye fastness.

Issue 4:
Regarding the limitation period for raising the demand, the appellants argued that their declaration under Notification No. 13/92 mentioned the manual twisting and printing process without steam. They contended that the extended period was wrongly invoked as they believed the heat setting was for yarn stability, not dye fixation.

Issue 5:
The quantity clearance without dyeing and discrepancies in invoices raised concerns, with the appellants claiming duty was demanded for yarn cleared without dyeing. They highlighted the absence of findings by the Commissioner (Appeals) on these aspects, seeking a re-examination of the issue.

Issue 6:
Penalty imposition was contested by the appellants, who argued their belief that steam was used for yarn stability, not dye fixation, should exempt them from penalties. They questioned the imposition of penalties under Sec. 11AC and Rule 209A, emphasizing their genuine belief and lack of intention to evade duty.

In the judgment, the Tribunal rejected the appellants' contentions, ruling that the heat setting process involving steam was integral to dyeing for dye fastness and yarn marketability. The matter of quantity clearance without dyeing and discrepancies in invoices was remanded to the Commissioner for further examination. The Tribunal upheld the invocation of the extended period for demand due to lack of clarity in the declaration and imposed penalties under Sec. 11AC, subject to re-determination post-reassessment. The personal penalty on the Director was reduced to Rs. 20,000 considering the circumstances.

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