2011 (3) TMI 787 - AT - Central Excise

Search and seizure - Demand beyond normal period of limitation - held that - The fact that the assessee was manufacturing nylon monofilament yarn of specified denierages and was also claiming exemption on said products was known to the department right from 1995 onwards. - Demand beyond normal period of limitation of one year set aside. Production of yarn in terms of diameters - the department s case that the yarn produced is not within the denierage prescribed in the notification with a ( ) 4% tolerance limit can sustain. - held that - This demand also will sustain only for the period falling within the normal time-limit of one year i.e., starting from 1-4-2001 to 15-10-2001. From the records it is seen that the appellant had maintained their production account and also issued invoices in terms of diameter of the yarn and not in terms of denierage. Once the accounts are maintained in that fashion the denierage can be computed only according to the formula adopted by the Commissioner. Needless to say, the assessee will be entitled to the proportionate Cenvat credit, (which they have reversed on availing duty exemption).

Summary

Issues:
Appeal against duty demand on nylon monofilament yarn under Excise duty exemption notification.

Analysis:
1. The appellant, a manufacturer of nylon monofilament yarn, claimed Excise duty exemption based on specific denierages mentioned in various notifications. The investigation revealed discrepancies in the denierages of the yarn, leading to a duty demand of Rs. 38,98,234/- under Section 11A(1) of Central Excise Act, 1944.
2. The appellant contended that the denierages were incorrectly determined by the Commissioner using a mathematical formula, arguing for a different method to calculate denierage based on actual weight. They also highlighted past audits, sample testing, and classification declarations to assert their compliance with regulations.
3. The Tribunal noted that the show-cause notice issued in April 2002 was time-barred for demands prior to April 2001. It emphasized the lack of conclusive evidence from sample tests conducted by the department, questioning the basis of the duty demand.
4. Regarding denierages, the Tribunal found most diameters of the yarn met the prescribed denierages, except for a few. It suggested granting the benefit of doubt to the appellant in cases where the specific gravity calculation could affect denierage tolerance limits.
5. The Tribunal ruled in favor of the appellant, setting aside penalties and remanding the case for re-quantification of duty demand. It allowed the benefit of exemption for certain diameters and emphasized the importance of accurate denierage calculations for duty assessment.

This detailed analysis of the judgment highlights the key arguments, findings, and implications of the case involving duty demand on nylon monofilament yarn under Excise duty exemption notifications.