2018 (11) TMI 671 - AT - Central Excise

Classification of goods - Nylon Twine - classification under erstwhile Tariff Item 68 and on introduction of Central Excise Tariff Act, 1985, as per the new schedule - Held that - The product of the appellant namely, twine yarn was liable to duty under erstwhile Tariff Item 18 prior to 01.3.1986, hence, the appellants are not eligible to retrospective exemption during the relevant period. But, from the submission of the learned Advocate for the appellant and on going through the pleadings advanced in the appeal, we find that prior to 01.3.1986, the product twine yarn proposed to be classified by the Department under Tariff Item 68, whereas the claim of the appellant was under Tariff Item 18. Denying the benefit of retrospective benefit of the amendment to the appellant through the exemption Notification No. 271/86-CE dated 24.4.1986, for the period 1.3.1986 to 23.4.1986 on the assumption that duty was charged @ ₹ 4 per kg on the Nylon Twine yearn manufactured by the appellant prior to 1.3.1986 is without merit and contrary to the facts on record and beyond scope of the show-cause notice and hence cannot be sustained. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of product under Central Excise Tariff Act, 1985; retrospective exemption notification applicability; denial of benefit under Central Duties of Excise (Retrospective Exemption) Act, 1986.

Classification Issue:
The appeal involved the classification of 'Nylon Twine' under the Central Excise Tariff Act, 1985. The appellant's product was initially classified under erstwhile Tariff Item 68, but after the introduction of the new schedule, it was classified under subheading 5607.90. The appellant claimed their product should be classified under Tariff Item 18, as upheld by the Hon'ble Bombay High Court in a Writ Petition, resulting in a refund of duty previously paid under Tariff Item 68. The appellant argued that the process of converting 'base yarn' into 'Nylon Twine' did not amount to manufacture, citing relevant legal precedents. The Tribunal found that the denial of retrospective exemption to the appellant based on the assumption that duty was charged prior to 01.3.1986 was unfounded, as the appellant's classification under Tariff Item 18 was confirmed by the High Court, and the duty refund was not contested. Therefore, the Tribunal held that the denial of exemption was without merit and set aside the impugned order.

Retrospective Exemption Issue:
The issue of retrospective exemption arose concerning Notification No. 271/86-CE dated 24.4.1986. The appellant argued that their case fell under this exemption which had retrospective effect due to the Central Duties of Excise (Retrospective Exemption) Act, 1986. The Commissioner (Appeals) had denied the benefit of this exemption, stating that the product was liable to duty under Tariff Item 18 before 01.3.1986. However, the Tribunal, after considering the appellant's submissions and the High Court's decision confirming the classification under Tariff Item 18, found that the denial of retrospective benefit based on the duty charged prior to 01.3.1986 was unjustified. The Tribunal held that the denial of retrospective exemption was contrary to the facts on record and beyond the scope of the show-cause notice, thus allowing the appeal and setting aside the impugned order.

Conclusion:
The Tribunal, comprising Dr. D.M. Misra and C.J. Mathew, Members, ruled in favor of the appellant, represented by Shri S.R. Nair, Advocate, against the order of the Commissioner of Central Excise (Appeals). The judgment highlighted the correct classification of 'Nylon Twine' under the Central Excise Tariff Act, 1985, and the applicability of retrospective exemption under Notification No. 271/86-CE dated 24.4.1986. The Tribunal emphasized the importance of legal precedents and the High Court's decision in confirming the appellant's classification under Tariff Item 18, ultimately leading to the allowance of the appeal and setting aside of the impugned order.