1983 (7) TMI 324 - AT - Central Excise

Summary

Issues:
Interpretation of duty liability under the compounded levy scheme for mixed yarn; Applicability of compounded levy rates withdrawal on 24-7-1972 to yarn held in stock; Determination of duty liability on yarn manufactured before 24-7-1972.

Analysis:
The case involved a dispute regarding the duty liability of the appellants under the compounded levy scheme for mixed yarn containing more than 40% cotton, which was classifiable under Item 18E of the Central Excise Tariff. The compounded levy scheme was withdrawn on 24-7-1972, and the normal duty became payable as per Notification No. 168/72-C.E. The issue was whether the appellants were liable to pay the normal yarn duty for the yarn held in stock on the crucial date of 24-7-1972.

The appellants argued that their duty liability under Notification No. 62/72-C.E. was determined before the crucial date, and as per Rule 96W(3), this liability was to be paid along with the duty on fabrics. They contended that the duty at the normal rate was applicable only to yarn manufactured after 24-7-1972. However, the lower authorities held that since the compounded levy rates ceased to exist from 24-7-1972, the normal duty was payable for all yarn held in stock, regardless of the date of manufacture.

During the hearing, the appellants cited various case laws to support their case, emphasizing the interpretation of rules related to duty liability. The Tribunal analyzed the case laws cited and distinguished them based on their applicability to the present case. The Tribunal highlighted judgments from the Bombay High Court and Gujarat High Court, which emphasized that the date of clearance of fabrics was irrelevant for determining the duty liability on yarn manufactured under the compounded levy scheme.

The Tribunal noted that the compounded levy scheme under Rule 96W was a self-contained code, and the provisions of other normal rules did not apply to it. The Tribunal referred to its earlier order and the Bombay High Court judgments, which emphasized that the duty liability on yarn had to be determined based on the rules prevailing at the time of actual manufacture, not at the time of fabric clearance. The Tribunal concluded that denying the benefit of the compounded levy scheme would disrupt the entire scheme's purpose.

The Department failed to provide any contrary judgment or order on the interpretation of Rule 96Q. The Tribunal upheld the earlier order's ratio and emphasized that even if the compounded levy scheme ceased on 24-7-1972, the normal duty rate could not be retrospectively applied to yarn already removed for captive use in fabric manufacturing. The date of fabric clearance was deemed irrelevant for calculating the normal duty on yarn. Consequently, the Tribunal allowed the appeal in favor of the appellants, providing them with consequential relief.