2017 (2) TMI 377 - AT - Central Excise

Exemption N/N. 35/95-CE. - embroidery thread - Held that - the yarn falling under chapter 51,52,54 or 55 is exempted except sewing thread subject to condition No. 5 - Since the product is admittedly embroidery thread it is other than the sewing thread therefore it is clearly eligible for exemption notification. The circular No. 26/95 of the Commissioner Bombay also supports the claim of the appellants wherein it was clarified that even when the embroidery yarn is used on the manufactured fabrics, it was considered as used in the Embroidery fabrics, therefore the exemption N/N. 35/95-CE dt. 16.3.95 was extended to the embroidery yarn. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Claim of SSI exemption notification and general exemption Notification No. 35/95 dt. 16.3.95 for manufacturing Art Silk Embroidery Sewing Thread without registration.

Analysis:
The appellants, engaged in manufacturing Art Silk Embroidery Sewing Thread, were searched by officers revealing clearance of goods without registration. The product was confirmed as embroidery thread, and duty demand was raised. The appellants claimed SSI and general exemptions, but authorities denied SSI exemption citing the brand ownership issue and did not properly address the general exemption. The Commissioner upheld the demand, leading to the appeal.

The appellant's counsel argued that the product qualifies for the general exemption Notification No. 35/95-CE as embroidery thread, supported by a test report. They also claimed eligibility for SSI exemption Notification No.1/93 dt. 28.2.93, asserting brand ownership due to a partnership conversion. The Revenue representative reiterated the findings, stating the brand belonged to another entity, citing relevant judgments.

Upon review, the Tribunal found the product, being embroidery thread, eligible for exemption under Notification No. 35/95-CE, exempting yarn except sewing thread. The circular from the Commissioner supported this interpretation, extending the exemption to embroidery yarn used in fabric manufacturing. Consequently, the appellants were deemed entitled to the exemption, rendering the demand unsustainable. As a result, the impugned order was set aside, and the appeals were allowed.