2005 (11) TMI 5 - AT - Central Excise

Summary

Issues:
Exemption withdrawal under Notification No. 26/94 dated 01.03.1994, Duty payment period from 10.03.1994 to 24.04.1994, Proforma credit claim under Rule 56A, Appeal against grant of proforma credit, Tribunal's decision and Supreme Court's decision on the manufacturing process.

Analysis:

The case involved the respondents engaged in the manufacturing of various yarns and cords, including Polyester/Nylon filament yarn, Cotton rove twisted yarns, Grey/Dipped cords, and Cotton Nylon twisted cord. Initially, doubled/multifolded yarns were exempt from duty under Notification No. 31/93 dated 28.02.1993. However, this exemption was revoked by Notification No. 26/94 dated 01.03.1994, leading the assessee to commence duty payment from 1.3.94 onwards. Subsequently, the assessee ceased duty payment from 10.03.1994 to 24.04.1994, clearing the doubled/multifolded yarns without duty. The Department issued a show-cause notice demanding duty for this period and proposed penalties for contravention of Central Excise Rules.

During the proceedings, the assessee claimed the benefit of proforma credit under Rule 56A for the duty paid on the single yarn used in manufacturing the doubled/multifolded yarn. The Commissioner (Appeals) accepted this claim while still holding the assessee liable to pay duty for the period from 10.03.1994 to 24.04.1994. The Department appealed against the grant of proforma credit to the assessee.

In response, the Tribunal considered the submissions and noted the earlier decision by the Supreme Court in Commissioner of Central Excise, Trichy Vs. Madura Coats Ltd., which held that the process of doubling/multifolding of yarns by the assessee did not amount to 'manufacture,' rendering the goods not dutiable. Consequently, the Tribunal dismissed the Revenue's appeal against the grant of proforma credit to the assessee. The operative portion of the order was pronounced on 25.10.2005.