1984 (4) TMI 283 - AT - Central Excise

Summary

Issues:
1. Interpretation of central excise duty demand on grey acrylic yarn.
2. Liability of payment of base stage duty on yarn.
3. Applicability of exemption notification on duty payment.
4. Burden of proof on Department regarding duty payment.
5. Application of Rule 9(2) in the demand notice.

Analysis:
1. The appellants contested the demand for central excise duty on grey acrylic yarn, arguing that they were only engaged in dyeing or texturising the yarn on a job work basis and were not the manufacturers of the grey yarn. They claimed that the Department's interpretation of the Tariff converted it into a sales tax, which was illegal and unconstitutional. They relied on the scheme of payment of duty on base yarn and texturised yarn to support their position that they were not liable to pay the base stage duty.

2. The Department contended that the appellants were availing concessions under the exemption notification and were required to fulfill the conditions laid down in the notification. They argued that not all goods available in the market could be presumed to have paid the duty leviable thereon unless a specific deeming provision was present in the exemption notification.

3. The Tribunal analyzed the liability to pay base stage duty on yarn under Tariff Item 18(i) and concluded that the duty was on the spinner of the yarn. The Tribunal interpreted the Tariff entry and the exemption notification to clarify that the provision allowed spinners to pay both base duty and texturising duty together at the time of removal of texturised yarn to avoid double payment. The Tribunal found no basis to conclude that customers purchasing plain yarn from the market had to pay base stage duty if they were not the spinners of the base yarn.

4. The Tribunal emphasized that plain yarn available in the market was deemed to have paid the base duty on its removal from the spinning mill. If the Department had evidence that the duty was not paid, proceedings should be initiated against the spinning mill, not the customers or processors. The burden of proof regarding duty payment lay with the Department, and customers were not required to prove the duty paid character of the base yarn.

5. The appellants argued that Rule 9(2) cited in the demand notice was wrongly applied, as they had cleared the processed yarn on payment of texturising duty. While the appellants acknowledged that the demand was within time, they did not press this point significantly. The Tribunal set aside the demand and allowed the appeal, providing consequential relief to the appellants based on the interpretation of the Tariff entry and exemption notification.