1983 (6) TMI 188 - AT - Central Excise

Summary

Issues Involved:
1. Classification of the product 'PPRF' under Central Excise Tariff.
2. Refund claim for excise duty paid.
3. Definition and applicability of 'manufacture' and 'fancy yarn'.
4. Admissibility of refund despite non-contestation of approved classification.
5. Application of the 'added value test' and double duty concept.

Issue-wise Detailed Analysis:

1. Classification of the Product 'PPRF':
The Company filed a Classification List on 10-4-1978 under Rule 173B of the Central Excise Rules, 1944, indicating 'PPRF' as not exigible to excise duty. The Department disagreed, classifying it under Tariff Item 68. The Company complied under protest and later sought a refund of the duty paid. The Assistant Collector disallowed the refund, asserting that the Company accepted the classification by not appealing it. The Appellate Collector upheld this, stating 'PPRF' was a new variety of yarn, a 'fancy yarn', not covered by specific Tariff Items 18 to 18F, thus rightly classified under the residuary Item 68.

2. Refund Claim for Excise Duty Paid:
The Company's refund claim for duty paid on 'PPRF' was rejected by the Assistant Collector on grounds of non-contestation of the classification. The Appellate Collector supported this, emphasizing that the Company did not dispute the classification when asked to file a revised list. The Tribunal agreed, stating the Company should have contested the classification at the initial stage rather than through a refund claim.

3. Definition and Applicability of 'Manufacture' and 'Fancy Yarn':
The Company argued that the process did not amount to 'manufacture' as per trade parlance and cited Supreme Court cases (Union of India v. Delhi Cloth and General Mills, South Behar Sugar Mills v. Union of India) to support their claim. The Appellate Collector and Tribunal disagreed, holding that the process of twisting and doubling created a new product, a 'fancy yarn', thus falling under Tariff Item 68. The Tribunal found no technical literature restricting 'fancy yarn' to specific characteristics, supporting the broader interpretation.

4. Admissibility of Refund Despite Non-Contestation of Approved Classification:
The Tribunal upheld the view that since the Company did not dispute the classification when directed to file a revised list, they could not claim a refund on the basis of an erroneous classification later. This aligns with the principle that procedural compliance is essential for contesting assessments.

5. Application of the 'Added Value Test' and Double Duty Concept:
The Tribunal rejected the 'added value test' argument, stating it is not recognized in the Indian Excise Tariff system. The concept of double duty is acknowledged in excise law, where both raw materials and finished products can be subject to duty. The Tribunal emphasized that the procedure under Rule 56A, which allows proforma credit for duty paid on raw materials, does not apply to goods under Tariff Item 68.

Conclusion:
The Tribunal dismissed the appeal, affirming the Appellate and Assistant Collectors' orders. It held that 'PPRF' is rightly classified under Tariff Item 68 as a new product resulting from a manufacturing process. The refund claim was inadmissible due to non-contestation of the classification. The 'added value test' and double duty arguments were also rejected, reinforcing the procedural and substantive compliance required under excise laws.