1988 (4) TMI 218 - AT - Central Excise

Summary

Issues:
Refund claim rejection based on duty payment mistake, interpretation of government notifications on excise duty rates, retrospective effect of duty imposition on cotton yarn.

Analysis:
The judgment by the Appellate Tribunal CEGAT, New Delhi involved two appeals concerning the rejection of refund claims by the Assistant Collector of Central Excise and Customs, Jodhpur. The first appeal, Order No. 6/79, dealt with a refund claim of Rs. 38,763.08 on yarn used for fabric manufacture. The second appeal, Order No. 4/79, involved a refund claim of Rs. 76,026.91 on packed cotton fabrics. The third appeal, Order No. 5/79, concerned a refund claim of Rs. 2,03,806.62 on cotton yarn content of cotton fabrics. The basis for these refund claims was the issuance of Notifications No. 131/77-C.E. and No. 132/77-C.E., which exempted certain yarn from excise duty if used in weaving cotton fabrics in a composite mill.

The appellants argued that Notification No. 226/77-C.E., issued on 15th July 1977, imposed duty on cotton yarn with retrospective effect. They relied on a judgment by the Gujarat High Court to support their interpretation. The Gujarat High Court's ruling emphasized that during the relevant period, yarn used in a composite mill for fabric manufacture was exempt from excise duty. The appellants contended that duty should only be levied on cotton fabrics at the stage of removal, as the yarn used was exempt from duty under Notification No. 132/77.

However, the lower authorities maintained that excise duty is charged at the time of goods removal from the manufacturing premises, following the procedure prescribed by the Central Excises and Salt Act, 1944. They argued that duty became chargeable on the cotton fabrics when they were removed from the factory, despite the earlier exemption on the yarn used. The Tribunal considered the arguments presented by both parties and referenced a previous decision in the case of Morarjee Goculdas Spinning and Weaving Co. Ltd. v. Collector of Central Excise, Bombay, which favored the appellants' position.

After a thorough review of the facts, submissions, and the previous Tribunal decision, the Appellate Tribunal CEGAT, New Delhi, concluded that the issue was indeed in favor of the appellants. The Tribunal found that the decision in the Morarjee Goculdas case supported the appellants' stance, leading to the allowance of the appeals.