1983 (6) TMI 181 - AT - Central Excise

Summary

Issues:
- Interpretation of duty liability on cotton yarn and cotton fabrics
- Inclusion of compounded duty in assessable value
- Application of Central Excises and Salt Act, 1944
- Impact of Notification No. 99/77 on duty liability
- Allegation of double taxation
- Consideration of special procedure for levy of duty
- Discriminatory implications on composite mills

Interpretation of Duty Liability on Cotton Yarn and Cotton Fabrics:
The case involved a dispute regarding the duty liability on cotton yarn and cotton fabrics. The Tribunal clarified that duty on yarn, falling under Item 18 of the Central Excise Tariff (CET), had to be paid, but the manner of collection had been altered to the point of fabric clearance. The special procedure for duty collection did not exempt the duty on yarn, but merely deferred its collection to a later stage.

Inclusion of Compounded Duty in Assessable Value:
The appellants contended that the compounded yarn levy paid at the fabric clearance stage should not be part of the assessable value of fabrics. However, the Tribunal held that the excise duty on yarn, even if deferred, had to be included in the assessable value of fabrics as it constituted a part of the manufacturing cost of cotton fabrics.

Application of Central Excises and Salt Act, 1944:
The Tribunal referred to Section 4(4)(d)(ii) of the Act, emphasizing that the duty on cotton yarn had to be considered in the assessable value of fabrics unless specifically exempted. The legal position did not admit any ambiguity, and the duty on yarn was deemed integral to the fabric's cost.

Impact of Notification No. 99/77 on Duty Liability:
The issuance of Notification No. 99/77, exempting cotton fabrics from duty equivalent to the yarn levy paid, did not support the appellants' argument against including yarn duty in fabric value. The notification was deemed necessary due to the duty's inherent inclusion in fabric valuation.

Allegation of Double Taxation:
The appellants' claim of double taxation was dismissed as unfounded. The Tribunal clarified that charging duty on cotton yarn and cotton fabrics under different tariff items with distinct rates did not constitute double taxation, as the items and rates differed.

Consideration of Special Procedure for Levy of Duty:
The Tribunal highlighted that the special procedure for duty collection aimed to facilitate composite mills but did not absolve them from paying duty on cotton yarn. The duty collection method had changed, not the duty liability itself.

Discriminatory Implications on Composite Mills:
The Tribunal noted that upholding the appellants' argument would unfairly advantage composite mills using captive yarn over those procuring duty-paid yarn externally, creating a discriminatory scenario. Such a situation was deemed untenable and discriminatory.

In conclusion, the Tribunal dismissed the appeal, finding no merit in the appellants' contentions based on the legal provisions, duty liability interpretations, and the absence of double taxation.