2004 (12) TMI 220 - AT - Central Excise

Summary

Issues involved:
Interpretation of condition 19(ii) of Notification No. 6/2002 for claiming exemption under Sl. No. 97 in respect of dyed yarn manufactured from doubled yarn.

Detailed Analysis:
The case involved an appeal against an Order-in-Original passed by the Commissioner of Customs & Central Excise, Bangalore. The appellants, manufacturers of Poly (dyed) yarn, cleared doubled yarn at nil rate of duty under a specific notification and then dyed the yarn on which duty was paid. The issue revolved around the interpretation of condition 19(ii) of the notification, which required the dyed yarn to be manufactured from yarn on which appropriate excise duty had already been paid. The Revenue argued that since no duty was paid on the doubled yarn, the condition was not fulfilled. However, the appellants contended that duty was paid on the single yarn, and hence, the dyed yarn was manufactured from duty-paid yarn, making them eligible for exemption.

The Revenue relied on Chapter Notes to argue that the process of doubling amounted to manufacture, making single yarn and doubled yarn distinct commodities. They emphasized that since duty was not paid on the doubled yarn, the appellants could not avail the exemption for the dyed yarn. The appellants, on the other hand, argued that the exemption notification should be interpreted based on its plain language and not Chapter Notes. They highlighted a previous decision to support their interpretation that duty paid on the single yarn sufficed for the entire process.

The Tribunal analyzed the situation and interpreted the expression in condition 19(ii) regarding yarn manufactured from duty-paid yarn. They noted that while duty was not paid on the doubled yarn, it was manufactured from single yarn on which duty had been paid. Therefore, the dyed yarn was ultimately manufactured from duty-paid yarn. The Tribunal found no requirement for duty payment at every stage and agreed with the appellants' argument that duty paid on single yarn covered the entire process. Additionally, the Tribunal considered the possibility of availing Cenvat credit for duty paid at the doubling stage, ensuring revenue neutrality. Consequently, the Tribunal allowed the appeal, granting consequential relief to the appellants.