2016 (12) TMI 592 - AT - Central Excise

Job-work - clearance of fabric as starched - whether desizing activity carried out by appellant shall amount to scouring ? - Held that - To resolve the controversy, whether scouring amounts to desizing or vice versa, Revenue has not brought out any evidence from any expert to suggest that it did not carry out scouring activity. Further, Revenue has no material to state that padding activity was not carried out. Ld. counsel explains that when starch was applied to the grey fabric received that ultimately resulted in finished goods. Therefore according to the mandate of the notification, if any one or more of the processes enumerated under Sl.No.46 is carried out, that grants the benefit of the notification to the manufacturer - In absence of any expert s opinion that the activity carried out by the appellant was not desizing and does not amount to scouring , Revenue failed to discharge its burden of proof and fails in its contention - no penalty in any case is imposable for no deliberate breach of law since interpretation of law was involved - appeal allowed - decided in favor of appellant.

Summary

Issues:
Dispute over whether desizing activity amounts to "scouring" for excise duty classification under Notification No.38/2003-CE.

Analysis:
The appellant, a yarn manufacturer, sent yarn to a job worker for making grey fabrics, which were then sent to another job worker for bleaching, desizing, and starching. The appellant claimed the benefit of Notification No.38/2003-CE, paying 5% excise duty. However, the Revenue contended that desizing is not scouring and that the appellant should pay 8% excise duty along with 2% additional excise duty. The dispute centered on whether the appellant's activities fell within the scope of the notification's provisions.

The notification specified various processes, including scouring, that would qualify for concessional duty benefit. The Revenue argued that the appellant did not carry out scouring or padding activities as per the notification's requirements. The appellant's failure to demonstrate the completion of any listed activities under the notification meant they should be liable for the higher excise duty rates.

To resolve the controversy, the Tribunal noted that the Revenue provided no expert evidence to prove that the appellant did not engage in scouring or padding activities. The appellant's counsel argued that applying starch to the grey fabric constituted one of the processes listed in the notification, thus entitling them to the concessional duty benefit. The Tribunal found that without expert opinion to refute the appellant's activities as not constituting desizing or scouring, the Revenue failed to meet its burden of proof. Consequently, the Tribunal allowed all appeals, emphasizing that no penalties were applicable due to the interpretational nature of the legal issue involved.