1983 (4) TMI 177 - AT - Central Excise

Summary

Issues Involved:
1. Classification and duty liability of yarn under Item 18-E of the Central Excise Tariff.
2. Applicability of Notification No. 62/72 and Notification No. 169/72.
3. Determination of the relevant date for duty assessment.
4. Validity of the Appellate Collector's order.
5. Interpretation and application of Rule 96W of the Central Excise Rules.

Issue-wise Detailed Analysis:

1. Classification and Duty Liability of Yarn under Item 18-E of the Central Excise Tariff:
The appellants manufactured yarn containing 50% polyester and 50% cotton, which became liable to duty under Item 18-E ("yarn, all sorts, not elsewhere specified") of the Central Excise Tariff with effect from 17-3-1972. The duty on such yarn was initially governed by Notification No. 62/72, which allowed a concessional duty rate payable at the time of clearing the fabrics.

2. Applicability of Notification No. 62/72 and Notification No. 169/72:
Notification No. 62/72, issued on 17-3-1972, allowed the appellants to discharge their duty liability on yarn at a concessional rate when used in the manufacture of fabrics. However, Notification No. 169/72, issued on 24-7-1972, amended Notification No. 62/72, making the special procedure inapplicable to the yarn cleared on or after 24-7-1972. The appellants argued that this amendment did not have retrospective effect and should not affect the yarn cleared before 24-7-1972.

3. Determination of the Relevant Date for Duty Assessment:
The core issue was whether the duty on yarn should be assessed at the time of its removal for captive consumption or at the time of clearance of the fabrics made from such yarn. The appellants contended that the relevant date was the removal of yarn for captive consumption, which occurred when the concessional rate was in force. The respondent argued that the duty should be assessed at the time of clearance of the fabrics, as per Rule 9A of the Central Excise Rules and supported by judicial precedents.

4. Validity of the Appellate Collector's Order:
The appellants claimed that the Appellate Collector's order was a non-speaking order as it did not address their contentions. They argued that the order should be set aside on this ground.

5. Interpretation and Application of Rule 96W of the Central Excise Rules:
Rule 96W allowed manufacturers to discharge their duty liability on yarn used in fabric production by paying a sum calculated based on the rate per square meter of the fabric. The appellants were granted permission to avail of this special procedure. The rule stipulated that any alteration in the rates of duty would require recalculation of the duty payable. The appellants argued that since the yarn was removed for captive consumption when the concessional rate was in force, the duty should be assessed at that rate.

Judgment Analysis:

Classification and Duty Liability:
The Tribunal confirmed that the yarn manufactured by the appellants fell under Item 18-E and was initially subject to the concessional duty rate under Notification No. 62/72.

Applicability of Notifications:
The Tribunal agreed with the appellants that the amendment introduced by Notification No. 169/72 did not have retrospective effect. Therefore, the yarn cleared for captive consumption before 24-7-1972 was entitled to the concessional rate specified in Notification No. 62/72.

Relevant Date for Duty Assessment:
The Tribunal held that the duty on yarn removed for captive consumption should be assessed at the concessional rate in force at the time of such removal, not at the time of clearance of the fabrics. This interpretation was consistent with the special procedure under Rule 96W, which allowed duty liability to be discharged at the time of fabric clearance but based on the rate applicable when the yarn was removed for captive consumption.

Validity of the Appellate Collector's Order:
The Tribunal implicitly acknowledged the appellants' contention regarding the non-speaking nature of the Appellate Collector's order by setting aside the order and allowing the appeal.

Interpretation and Application of Rule 96W:
The Tribunal emphasized that the special procedure under Rule 96W was a self-contained code. The duty liability on yarn cleared for captive consumption during the period when the special procedure was in force should be determined based on the concessional rate specified in Notification No. 62/72. The withdrawal of the special procedure did not affect this liability.

Conclusion:
The Tribunal allowed the appeal, directing the Central Excise authorities to calculate the duty liability based on the concessional rate under Notification No. 62/72 for yarn cleared for captive consumption before 24-7-1972. Any excess duty paid was to be refunded to the appellants within two months.