2006 (4) TMI 134 - SC - Central Excise

Whether the appellant/assessee was entitled to the benefit of Notification No. 35/95-CE., dated 16-3-1995 as amended by Notifications No. 77/95-C.E., dated 3-4-1995; No. 81/95-C.E., dated 7-4-1995; No. 84/95-C.E., dated 18-5-1995 and No. 115/95-C.E., dated 3-11-1995? Held that - The Tribunal did erred in refusing to hear the appellant only on the ground that the ground had not been raised earlier. Rule 10 was sufficiently widely framed to allow the Tribunal to do so. Having regard to the fact that the Tribunal was itself considering the issue on a contested hearing there was no reason why the appellant should have been shut out from pleading its case on the same basis. As far as the decision on merits is concerned, Serial No. 5 leaves no doubt in our mind that the yarn referred to in Col. 3 is double yarn. This is clear from the condition mentioned in Col. 5 namely that the yarn must be produced falling within Chapter 52, 54 and 55 of the Schedule to the Central Excise and Salt Act, 1944. The Tribunal has also considered the fact that unless double yarn was subjected to the processes mentioned in Col. 3 of the Notification, there was no question of the yarn being marketable. The proviso is limited to Serial Nos. l and 2 and does not affect Serial No. 5. The reasoning of the Tribunal, in our opinion, is unexceptionable. The appeal as far as the M/s. Devangere Cotton Mills Ltd. is concerned the same is allowed.

Summary

Issues:
Interpretation of Notification No. 35/95-CE for exemption eligibility under Serial No. 1 and 5; Application of proviso to Serial No. 1 and 2 regarding clearances of yarn from a factory; Entitlement to exemption under Serial No. 5 for manufacturing double yarn; Jurisdiction of the Tribunal to consider new grounds under Rule 10 of the Customs and Excise and Gold (Control) Appellate Tribunal Procedure Rules, 1982.

Analysis:
The judgment addressed the common question of whether the appellant/assessee was entitled to the benefit of Notification No. 35/95-CE, specifically focusing on Serial No. 1 and 5. Serial No. 1 pertained to yarn for fabric manufacture, subject to specific conditions, while Serial No. 5 related to yarn processes like beaming or reeling. The proviso to the Notification restricted exemptions for clearances of yarn from factories producing single yarn, impacting the eligibility of certain appellants.

In the case of M/s. Devangere Cotton Mills Ltd., the denial of exemption under Serial No. 1 due to the proviso was challenged. On the other hand, M/s. Coats Viyella (India) Ltd. claimed exemption under Serial No. 5 for manufacturing double yarn used in fabric production. The Tribunal's decision favored M/s. Coats Viyella (India) Ltd., leading to an appeal by the Revenue. The Tribunal's consideration of new grounds raised by M/s. Devangere Cotton Mills Ltd. was disputed, invoking Rule 10 of the 1982 Rules allowing parties to introduce additional grounds with the Tribunal's permission.

The Supreme Court found the Tribunal's refusal to hear the appellant on new grounds unjustified, emphasizing Rule 10's broad scope. The Court clarified that Serial No. 5 referred to double yarn production, distinct from the proviso's impact on Serial Nos. 1 and 2. The Tribunal's reasoning on the eligibility for Serial No. 5 exemption was deemed appropriate, leading to the allowance of M/s. Devangere Cotton Mills Ltd.'s appeal and the dismissal of Revenue's appeals against M/s. Coats Viyella (India) Ltd.

In conclusion, the judgment upheld the entitlement to exemption under Serial No. 5 for certain appellants, highlighting the importance of procedural fairness and correct interpretation of statutory provisions in excise matters.