2011 (1) TMI 726 - AT - Central Excise

Demand - Rule 25 of Central Excise Rules - On going through the comparative chart, it can be seen that a substantial part of all the three notifications are similar except for the Explanation provided in Notification No. 29/2004-C.E. which states that Manufacture of yarns means manufacture of filaments of organic polymers - It only explains what are organic polymers and how they can be produced but the explanation actually relates to manufacture of yarns - Decided against the assessee As regards penalty under Rule 25 of Central Excise Rules, 1944 - Form the submissions made by the appellants as well as the observations relating to interpretation of notification would clearly show that the interpretation given by the appellant cannot be considered as perverse or has been made with mala fide intentions - the issue involved in this case is of interpretation of notification and therefore, in the absence of any evidence of deliberate intention to evade duty, no penalty can be imposed - Appeals are disposed of

Issues Involved:
1. Eligibility for benefit under Serial No. 5(a) of exemption Notification No. 29/2004-C.E.
2. Interpretation of the term "manufacture of yarns" as per the notification.
3. Confirmation of duty demand and imposition of interest under Section 11AB of the Central Excise Act, 1944.
4. Imposition of penalty under Rule 25 of the Central Excise Rules, 1944.

Detailed Analysis:

1. Eligibility for Benefit under Serial No. 5(a) of Exemption Notification No. 29/2004-C.E.:
The appellants, engaged in manufacturing various types of yarn, claimed benefits under Serial No. 5(a) of exemption Notification No. 29/2004-C.E., dated 9-7-2004, as amended. The Revenue disputed this claim, arguing that the appellants did not meet all the conditions stipulated in the notification, specifically condition (f). The relevant notification stipulates that the manufacturer should not have the facility in their factory for the manufacture of filament yarn of Chapter 54 and should meet the criteria for "manufacture of yarns" as defined in the notification.

2. Interpretation of the Term "Manufacture of Yarns":
The core of the dispute was the interpretation of the term "manufacture of yarns" as per the notification. The appellants argued that they did not have polymerization facilities and only carried out direct spinning from externally procured chips. They contended that their process did not involve the polymerization or chemical transformation of organic polymers, as described in the notification. The Tribunal referred to a previous case, DNH Spinners v. C.C.E., Vapi, where it was concluded that the appellants were not eligible for the exemption. The Tribunal interpreted the term "manufacture of yarns" to mean the manufacture of filaments from organic polymers, regardless of whether the polymers were produced by polymerization or chemical transformation.

3. Confirmation of Duty Demand and Imposition of Interest:
The Tribunal confirmed the duty demand against the appellants, stating that the appellants did not meet the criteria for the exemption. As per established legal principles, once a duty demand is confirmed, interest under Section 11AB of the Central Excise Act, 1944, is automatically attracted.

4. Imposition of Penalty under Rule 25 of the Central Excise Rules, 1944:
The Tribunal examined the imposition of penalties and found that the Commissioner had not provided sufficient evidence of deliberate intent to evade duty. The appellants' interpretation of the notification, though incorrect, was not considered perverse or made with mala fide intentions. Given the similarities between the disputed notification and other notifications, the Tribunal concluded that the issue was primarily one of interpretation. Therefore, the penalty imposed on the appellants under Rule 25 of the Central Excise Rules, 1944, was set aside.

Conclusion:
The Tribunal upheld the duty demand and interest against the appellants but set aside the penalties. The appeals were disposed of with consequential relief to the appellants. The judgment emphasized that the interpretation of the notification was the key issue, and the appellants' actions did not warrant the imposition of penalties.

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