1983 (8) TMI 282 - AT - Central Excise

Summary

Issues:
1. Rejection of refund claim for lap waste of yarn under Notification No. 172/72-C.E.
2. Interpretation of the eligibility criteria specified in the Explanation of the notification.
3. Validity of the grounds for rejection by lower authorities.
4. Application of Rule 9 and 9A for duty payment and refund eligibility.
5. Discrimination claim based on cotton content in yarn.
6. Entitlement of lap waste arising during weaving process to refund under the notification.

Analysis:

1. The appellants contested the rejection of their refund claim for lap waste of yarn under Notification No. 172/72-C.E., which exempted certain waste yarn from excise duty. The notification specified eligible types of waste yarn, including lap waste, under two categories based on cotton content in the yarn.

2. The appellants' yarn did not fall under the first category specified in the Explanation of the notification as it contained less than 40% cotton. They argued that lap waste, arising during the weaving process, should be eligible for refund under the substantive part of the notification, irrespective of the cotton content criteria.

3. The lower authorities rejected the claim on two grounds: first, waste arising from duty-paid yarn used in fabric manufacturing was not eligible for refund as it was already duty paid; second, the appellants failed to establish that the waste claimed for refund arose within the eligible period, as per Rule 11 of the Central Excise Rules, 1944.

4. The Department's Representative argued that excise duty is payable at the time of goods removal, and waste arising after removal of duty-paid goods is not entitled to refund. He emphasized the importance of establishing duty payment timing for refund claims under Rule 11 and questioned the high percentage of claimed lap waste.

5. The appellants contended that denying them the refund would discriminate against mills using less than 40% cotton yarn. However, the Tribunal clarified that the notification applied to all waste yarn falling under the specified tariff item, regardless of cotton content, and rejected the discrimination argument.

6. The Tribunal held that excise duty is levied on manufacture, and waste arising after assessment and removal of duty-paid goods is not eligible for refund under the notification. Lap waste generated during the weaving process post-assessment was not covered for refund, unlike waste from pre-assessment processes. Consequently, the appellants' claim for lap waste refund was deemed inadmissible based on substantive grounds, leading to the rejection of the appeal.