1987 (2) TMI 299 - AT - Central Excise

Summary

Issues Involved:
1. Levy of cess on jute yarn captively consumed.
2. Levy of cess on sacking cloth captively consumed.
3. Differential cess on gunny bags.

Detailed Analysis:

1. Levy of cess on jute yarn captively consumed:

The Assistant Collector of Central Excise, Visakhapatnam, demanded cess on jute yarn produced and captively consumed by the appellants during the period from 1-5-1984 to 30-9-1984. The Collector (Appeals) upheld this demand, stating that jute yarn/twine and sacking cloth fall under different serial numbers in the Schedule to the Jute Manufactures Cess Act, thus necessitating the payment of cess on goods consumed captively.

The appellants argued that according to Rule 3 of the Jute Manufactures Cess Rules, cess is payable only on finished jute manufactures removed for sale or export, not on goods consumed within the factory. They also cited Central Excise Notification No. 56/72, which exempts jute yarn consumed within the factory from excise duty, arguing that this should also exempt the goods from cess.

However, the Tribunal held that the exemption notification under the Central Excises Act does not apply to cess under the Jute Manufactures Cess Act, as they are separate enactments. The Tribunal concluded that the demand for cess on jute yarn captively consumed was correctly made and upheld the orders of the lower authorities.

2. Levy of cess on sacking cloth captively consumed:

The Assistant Collector also demanded cess on sacking cloth produced and captively consumed within the factory and the differential amount of cess short-paid on gunny bags. The appellants contended that sacking cloth and sacking bags fall under the same serial number in the Schedule to the Cess Act, thus fulfilling the requirement of the third proviso to Rule 9 of the Central Excise Rules, which allows for exemption from duty on goods consumed within the factory for the manufacture of other goods falling under the same item number.

The Tribunal agreed with the appellants, noting that it has been accepted by the authorities that sacking cloth and sacking bags both fall under the term "sacking" (serial No. 3). Therefore, the demand for cess on sacking cloth captively consumed for the manufacture of sacking bags was not sustainable and was set aside.

3. Differential cess on gunny bags:

The demand for differential cess on gunny bags was based on the ground that sacking bags fall under item No. 10 in the Schedule to the Cess Act, while sacking cloth falls under item No. 3. However, the Tribunal found that sacking cloth and sacking bags are both covered by the term "sacking" (serial No. 3). Consequently, there was no basis for charging the differential cess, and the demand was set aside.

Conclusion:

(a) The demand for cess on jute yarn captively consumed for the manufacture of sacking cloth during the period prior to 1-10-1984 was correctly made and upheld.

(b) The demand for cess on sacking cloth captively consumed for the manufacture of sacking bags during the period prior to 1-10-1984 was not sustainable and set aside.

(c) The demand for differential cess on sacking bags for the period prior to 1-10-1984 was not sustainable and set aside.

The appeals were disposed of with consequential relief to the appellants.