2001 (1) TMI 975 - HC - Central Excise

Summary

Issues Involved:
1. Eligibility for excise duty rebate on exported threads.
2. Interpretation of relevant provisions and notifications under the Central Excise Rules.
3. Whether yarn and thread are considered the same for excise duty purposes.
4. Compliance with conditions stipulated in Notification No. 197/62.
5. Relevance of excise duty paid by a sister concern for claiming rebate.

Detailed Analysis:

1. Eligibility for Excise Duty Rebate on Exported Threads:
The petitioner, M/s. Madura Coats Limited, sought a writ to quash orders denying their rebate claim for excise duty paid on exported threads. The petitioner claimed a refund of Rs. 6,91,585.59 and Rs. 49,330.51 for excise duties paid on yarns converted to threads and exported.

2. Interpretation of Relevant Provisions and Notifications under the Central Excise Rules:
The petitioner argued that under Section XI of the Central Excise Tariff Act, 1985, yarn includes threads and no separate excise levy is imposed on threads if yarn duty is paid. The respondents countered that the rebate claim was rejected due to non-compliance with Notification No. 197/62, which requires goods to be exported directly from the factory or warehouse after payment of duty.

3. Whether Yarn and Thread are Considered the Same for Excise Duty Purposes:
The petitioner contended that yarn and thread are treated as one and the same globally and under the Central Excise Tariff Act. The petitioner cited judgments affirming that sewing thread does not lose its identity as cotton yarn. The respondents did not dispute this but argued that the rebate claim was invalid due to procedural non-compliance.

4. Compliance with Conditions Stipulated in Notification No. 197/62:
The respondents emphasized that the goods must be exported directly from the factory or warehouse after duty payment. Since the duty was paid on yarn by the petitioner's sister concern and not on the threads directly exported, the rebate claim was rejected. The petitioner argued that the transformation of yarn into thread does not necessitate a second incidence of duty.

5. Relevance of Excise Duty Paid by a Sister Concern for Claiming Rebate:
The petitioner's claim for rebate was based on the excise duty paid by their sister concern on yarn, which was then converted into threads and exported. The respondents argued that the excise duty paid by the sister concern was irrelevant as the goods exported were threads, not yarn.

Judgment:
The court found that the petitioner's claim was justified. It was established that yarn and thread are essentially the same for excise duty purposes, and no additional duty is required when yarn is converted into thread. The court held that the petitioner complied with the necessary conditions and that the rejection of the rebate claim was unreasonable and arbitrary.

The court quashed the orders passed by the respondents and directed them to refund the excise duty of Rs. 6,91,585.59 and Rs. 49,330.51 to the petitioner within sixty days. The writ petition was allowed with costs, and the connected miscellaneous petition was closed.