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2000 (11) TMI 157 - HC - Central Excise

Issues:
1. Interpretation of Notification No. 65/87-C.E. for exemption benefit on polythene liner jute bags.
2. Classification of jute bags with polythene liner under Central Excise Tariff Act.
3. Rejection of exemption benefit by Respondent No. 1.
4. Legal validity of show cause notices issued to the petitioner.
5. Application of precedent judgments in similar excise duty cases.

Issue 1: Interpretation of Notification No. 65/87-C.E.:
The case involved the interpretation of Notification No. 65/87-C.E., which exempted certain goods from excise duty. The petitioner, a manufacturer of jute bags with polythene liners, claimed exemption under this notification. The notification specified the maximum excise duty on sacks and bags of jute, but the Respondent No. 1 rejected the petitioner's claim, asserting that the polythene liner changed the essential character of the jute bags.

Issue 2: Classification of jute bags under Central Excise Tariff Act:
The jute bags manufactured by the petitioner were classified under sub-heading 6301.00 of Chapter 63, Section XI of the Central Excise Tariff Act, 1985. This classification was crucial in determining the applicable rate of duty and eligibility for exemption benefits under relevant notifications.

Issue 3: Rejection of exemption benefit by Respondent No. 1:
Respondent No. 1 rejected the petitioner's claim for exemption under Notification No. 65/87-C.E., stating that the polythene liner inserted in the jute bags before baling changed the essential character of the finished product. This rejection led to the issuance of show cause notices to the petitioner for payment of excise duty.

Issue 4: Legal validity of show cause notices:
The petitioner challenged the legality of the show cause notices issued by the Respondent for subsequent periods, contesting the denial of exemption benefits and imposition of excise duty. The court examined the grounds on which the notices were issued and the petitioner's compliance with the requirements.

Issue 5: Application of precedent judgments:
The court referenced a Supreme Court judgment in a similar excise duty case involving the use of duty-paid materials in manufacturing processes. The judgment highlighted the principle that duty exemption should not be denied when duty-paid materials are mixed with non-duty paid materials. This precedent was applied to support the petitioner's claim that the polythene liner did not alter the essential character of the jute bags, making them eligible for exemption benefits.

In conclusion, the High Court upheld the petitioner's appeal, setting aside the order of the Respondent No. 1 and granting exemption benefits under Notification No. 65/87-C.E. The court emphasized that the polythene liner did not change the fundamental character of the jute bags, aligning with established legal principles and precedent judgments. The dismissal of the appeal with no costs indicated the court's affirmation of the petitioner's entitlement to exemption benefits for the manufactured jute bags with polythene liners.

 

 

 

 

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