2007 (11) TMI 189 - AT - Central Excise

Process of texturising of yarn which is procured by them from certain importers, who have imported the same - Since the SCN and the OIO proceeds on the ground that CVD duty has not been paid by importer & accordingly the exemption u/not. 55/78 is not available though exemption is not available to imported yarn but only to indigenous yarn we hold that the exemption cannot be denied on this ground - since this was not the ground of denial in SCN or OIO, we set aside demand

Summary

Issues:
Claim of benefit under notification 55/78 for texturising yarn duty calculation; Denial of exemption due to non-payment of CVD duty on imported yarn; Interpretation of notification 55/98 regarding excise duty on base yarn.

Analysis:
The case involved the appellants engaged in texturising yarn procured from importers, claiming benefit under notification 55/78 for duty calculation. The issue arose when CVD duty on imported yarn was not paid, resulting in a demand for duty on the base yarn equivalent to CVD duty along with an additional amount. The appellant argued that CVD duty is the importer's liability, not theirs, and under notification 55/98, duty on base yarn must be excise duty, not CVD duty. The exemption cannot be denied based on non-payment of CVD duty, as the notification refers to duty paid on base yarn, applicable only to indigenous manufacture, not imported yarn.

Upon review, it was found that the denial of exemption was based on non-payment of CVD duty on imported yarn, with the Commissioner extending the exemption to other imported yarn where CVD duty had been paid. The Tribunal held that while the exemption is applicable only to indigenous yarn, not imported yarn, the denial of exemption solely on the grounds of non-payment of CVD duty was incorrect. Since the denial was not based on the inapplicability of the notification to imported yarn, the Tribunal set aside the denial and allowed the appeal, emphasizing that the exemption can only be availed for indigenous yarn.

In conclusion, the Tribunal clarified the interpretation of notification 55/98 regarding excise duty on base yarn, emphasizing that the exemption under the notification is limited to indigenous yarn and cannot be denied solely based on non-payment of CVD duty on imported yarn. The decision highlighted the importance of correctly applying the provisions of notifications and ensuring that exemptions are granted in accordance with the relevant legal framework.