2004 (2) TMI 71 - SC - Central Excise

Duty demand - Polyester staple fibre - Held that - Tribunal notices that the effect of Notification No. 191/85 is that levy of duty is only at one stage i.e. either at the Tow stage or at the Polyester Fibre stage - Yet for reasons, un-understandable to us, the Tribunal concludes that accepting the argument of the Revenue would defeat the purpose of the Notification No. 191/85. All that the Revenue is claiming is that duty has to be paid at one stage. Since duty has not been paid at Polyester Fibre stage, it has to be paid at the Tow stage. Also the final conclusion of the Tribunal that the Notification No. 76/92 dated 1st July, 1992 has retrospective effect has been arrived at without giving any cogent reasons. This Notification makes no referance to Notification No. 191/85. It is an exemption granted for the first time on 1st July, 1992. Such an exemption can have no retrospective effect unless the Notification itself so specifies. - Decided in favour of Revenue.

Summary

Issues:
1. Interpretation of Notification No. 191/85 regarding duty exemption on Polyester Fibre manufacturing.
2. Determination of the stage at which duty is levied - "Tow" stage or Polyester Fibre stage.
3. Retrospective effect of Notification No. 76/92 dated 1st July, 1992.

Analysis:
1. The case involved the interpretation of Notification No. 191/85, which exempted Polyester Fibre intended for specific use from duty payment. The Tribunal analyzed the levy of duty under the notification, emphasizing that duty was envisaged at either the "Tow" stage or the staple fibre stage, not both. The exemption was deemed to be related to duty payable at either stage, ensuring duty is paid only once in the manufacturing process. The Tribunal concluded that no duty would be chargeable on "Tow" used in manufacturing Polyester Fibre cleared under the notification.

2. The main contention was whether duty should be paid at the "Tow" stage since it was not paid at the Polyester Fibre stage. The Revenue argued duty had to be paid at one stage, supporting duty payment at the "Tow" stage. However, the Tribunal disagreed, stating that duty under Notification No. 191/85 was meant to be paid either at the "Tow" or staple fibre stage, not both. The Tribunal found the Revenue's argument would defeat the purpose of the notification, leading to the conclusion that duty need not be paid at the "Tow" stage if Polyester Fibre was cleared without duty under the notification.

3. Regarding the retrospective effect of Notification No. 76/92 dated 1st July, 1992, the Tribunal's decision to grant retrospective effect was challenged. The Appellate Authority set aside the Tribunal's decision, stating that the Notification did not refer to Notification No. 191/85 and was a new exemption effective from 1st July, 1992. The Authority emphasized that a new exemption could not have a retrospective effect unless explicitly mentioned in the Notification.

In conclusion, the Tribunal's judgment was set aside, and the Commissioner (Appeals) order was restored, emphasizing the single-stage levy of duty under Notification No. 191/85 and clarifying the lack of retrospective effect for Notification No. 76/92.