2017 (1) TMI 26 - AT - Central Excise

Interest - Penalty - N no.2/96-CE and N No.67/95-CE - Polyester Synthetic Tops/Manmade yarn - Held that - the Notification No.22/96 dated 23.07.96, which exempts all the goods falling within the Schedule to the Central Excise Tariff Act, 1985 specified under Col.4 of the Table annexed to the said notification no.22/96, when such inputs are manufactured in a factory and used within the factory of production in or in relation to the manufacture of corresponding final products of the description given in Col. 2 of the table annexed to the Notification No.22/96 (Supra) and falling under Chapter Heading No. or sub-heading nos. of the final products given in Col. 3 of the table annexed to the Notification, from the whole of the duty of excise and additional duty of excise leviable thereon - Synthetic Tops are used in the manufacture of yarn within the factory of production and the said yarn is further used in the manufacture of fabrics - Appeal dismissed - decided in favor of the assessee.

Summary

Issues:
Applicability of benefit of Notification no.2/96-CE dated 23.07.96 and Notification No.67/95-CE dated 16.03.95.

Detailed Analysis:

1. Applicability of Notification No.67/95-CE:
The Department argued that the party using synthetic tops for manufacturing yarn, which is further used in fabric production, is not eligible for exemption under Notification No.67/95-CE. They contended that the fabrics fall under the excluded category provided in the notification. However, the respondent's advocate referenced a previous order where it was accepted that Polyester Tops/Manmade Yarn/Wool Tops are exempted under Notification No.67/95-CE. The Commissioner had dropped the demand for Additional Excise Duty (AED) in that case, confirming the exemption from basic excise duty.

2. Interpretation of Notification No.22/96:
The Tribunal examined the Order dated 14.08.2007, which clarified that Polyester Tops/Manmade Yarn/Wool Tops are exempt from basic excise duty under Notification No.22/96. The exemption covers all inputs consumed in the factory for manufacturing fabrics. The Tribunal noted that the fabrics and yarn produced using synthetic tops fall under the specified categories in the notification, thus qualifying for exemption from duty.

3. Legal Precedents and Final Decision:
The Tribunal referred to a CESTAT order from Mumbai, emphasizing the measure of levy under the Central Excise Act and related notifications. It concluded that the case lacked merit and was not sustainable under the law. By analyzing the contents of Notification No.67/95-CE and Notification No.22/96-CE, the Tribunal determined that the demand on Polyester Tops/Manmade Yarn/Wool Tops used in fabric production was unwarranted. The appeal filed by the Revenue was dismissed, upholding the impugned order.

In summary, the Tribunal upheld the exemption granted under Notification No.67/95-CE and Notification No.22/96-CE for the manufacturing process involving synthetic tops, yarn, and fabrics, ultimately dismissing the Revenue's appeal.