1986 (7) TMI 260 - AT - Central Excise

Issues Involved:
1. Classification of hand-knitting acrylic yarn.
2. Validity of the show cause notice.
3. Applicability of Notification No. 27/75.
4. Interpretation of Explanation I(iv) under Tariff Item 18.
5. Time limitation for the demand of duty.
6. Imposition of penalty.
7. Applicability of Rule 9A(5) of Central Excise Rules, 1944.

Detailed Analysis:

1. Classification of Hand-Knitting Acrylic Yarn:
The appellants, manufacturers of hand-knitting acrylic yarn, argued that their grey yarn was assessed under Notification No. 27/75 and no further duty was payable after processing. They contended that dyeing does not constitute bulking or texturizing. The Tribunal concluded that the yarn subjected to steaming and dyeing acquires characteristics of bulked yarn, thus falling under the definition of bulked yarn as per the Central Excise Tariff.

2. Validity of the Show Cause Notice:
The appellants argued that the show cause notice was vague and that the onus of proving the yarn as bulked was on the Department. The Tribunal noted that the Department did not seek the Chief Chemist's advice but relied on the Silk and Art Silk Manufacturers Research Association's certificate, which indicated that the yarn did not have characteristics of bulked yarn.

3. Applicability of Notification No. 27/75:
The appellants claimed that acrylic hand-knitting yarn was specifically classified under Central Excise Tariff Item 18(i) in Notification No. 27/75. The Tribunal rejected this interpretation, stating that the notification covers yarn spun out of synthetic staple fiber but does not include bulked yarn.

4. Interpretation of Explanation I(iv) under Tariff Item 18:
A critical issue was whether the words "but does not include bulked yarn and stretch yarn" in Explanation I(iv) applied only to products mentioned in Explanation I(iv) or also to those in Explanation I(ii) and (iii). The Tribunal concluded that these words apply to all yarn other than textured yarn falling under tariff item 18(i), aligning with the pattern of Explanation II.

5. Time Limitation for the Demand of Duty:
The appellants raised the issue of time bar, arguing that the demand extended beyond one year. The Tribunal noted that the Appellate Collector had already restricted the demand to one year prior to the show cause notice date. The Tribunal upheld this decision, stating that the claim of goods being cleared in accordance with due procedure does not affect the Department's right to demand differential duty later.

6. Imposition of Penalty:
In the case of Modella, a penalty of Rs. 2000/- was imposed. The appellants argued that the Collector acknowledged their bona fides, making the penalty unsupportable. The Tribunal found that the appellants had not filed a classification list for dyed yarn, justifying the penalty imposed by the Collector.

7. Applicability of Rule 9A(5) of Central Excise Rules, 1944:
The appellants argued that under Rule 9A(5), duty should be payable as per the rate in force on the date of payment, and since the old tariff no longer exists, no duty would be payable. The Tribunal noted that Rule 9A(5) had been amended to state that duty is payable as per the rate in force on the date of the demand notice or payment, whichever is earlier. The Tribunal also observed that when the dates of actual removal of goods are ascertainable, Rule 9A(1)(ii) applies, making duty payable as per the rate on the date of removal.

Conclusion:
The Tribunal dismissed both appeals, upholding the classification of the yarn as bulked yarn, the validity of the show cause notice, the applicability of Notification No. 27/75, the interpretation of Explanation I(iv), the time limitation for the demand of duty, the imposition of penalty, and the applicability of Rule 9A(5) as amended.

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