2002 (8) TMI 221 - AT - Central Excise

Summary

Issues Involved:
1. Denial of exemption under Notification 4/97.
2. Classification and duty payment on Partially Oriented Yarn (POY).
3. Interpretation of exemption notifications and relevant statutory provisions.
4. Applicability of Board Circulars and judicial precedents.

Summary:

1. Denial of exemption under Notification 4/97:
The appellant challenged the decision of the Commissioner (Appeals), Ahmedabad, which confirmed the Order-in-Original denying the benefit of exemption under Notification 4/97 as amended. The Asst. Commissioner had confirmed a duty of Rs. 7,22,65,367/- and imposed a penalty of Rs. 50 lakhs u/r 173RQ of the Central Excise Rules.

2. Classification and duty payment on Partially Oriented Yarn (POY):
The appellant operates three units and the appeal concerns the Naroda unit, which receives POY from Patalganga and Hazira units. The Naroda unit texturizes and dyes the POY, paying duty at each stage despite existing exemptions. The department issued show cause notices alleging violations and improper classification, arguing that the appellant could not claim the exemption under Notification 4/97.

3. Interpretation of exemption notifications and relevant statutory provisions:
The appellant argued that the interpretation of item 116A in Notification 4/97, as amended by Notifications 19/97 and 34/97, should be harmonious. The appellant contended that the deletion of "draw-twisted or textured yarn" from item 116A and its retention in item 116B should be considered. The department maintained that the exemption notification should be strictly construed and that the appellant's facility for producing single yarn disqualified them from the exemption.

4. Applicability of Board Circulars and judicial precedents:
The department relied on Board Circulars and argued that the appellant could not pay duty on exempted products voluntarily. The appellant cited judicial precedents, including the Supreme Court's decision in Collector of Central Excise, Vadodara v. Dhiren Chemical Industries, to support their case. The Tribunal noted that the appellant had paid duty at each stage and that the exemption notification did not nullify the statutory duty rate.

Conclusion:
The Tribunal found that the appellant had paid duty appropriately and that the lower authorities' interpretation of the exemption notification and relevant provisions was incorrect. The Tribunal set aside the impugned order and allowed the appeal, emphasizing that statutory and notification terms should not be deemed redundant without proper justification.