1987 (6) TMI 291 - AT - Central Excise

Summary

Issues:
1. Whether compounded excise duty on cotton yarn payable at the time of clearance of fabrics forms part of the assessable value of the fabrics.
2. Whether duty on yarn should be excluded from the assessable value of fabrics under Section 4(4)(d)(ii) of the Central Excises and Salt Act.
3. Whether proceedings initiated under Central Excise Rule 10, which was omitted, could be continued.

Analysis:

Issue 1:
The primary issue in this appeal was whether the compounded excise duty on cotton yarn, paid at the time of clearance of fabrics, should be included in the assessable value of the fabrics. The appellant argued that the compounded duty was essentially duty on the fabrics and not on the yarn itself. However, the Collector (Appeals) held that the deferred duty on yarn was still duty on yarn, not on fabrics. The duty on fabrics alone had to be excluded from the assessable value, as per Sec. 4(4)(d)(ii) of the Act. The Collector also limited the enforceability of the demand to one year from the date of the show cause notice, barring the demand for the period prior to that one-year period.

Issue 2:
Regarding the exclusion of duty from the assessable value of fabrics under Section 4(4)(d)(ii), the appellant contended that all excise duties payable on the goods should be excluded, including the compounded duty on yarn paid at the time of fabric clearance. However, the Tribunal disagreed, stating that only the duty on the fabric itself needed to be deducted from the normal price of the fabric. The deferred duty on yarn was still considered duty on yarn, not on the fabric, and therefore should not be excluded from the assessable value.

Issue 3:
The appellant further argued that proceedings initiated under the omitted Central Excise Rule 10 could not be continued after its omission. However, citing a previous judgment and the legal principle that proceedings initiated under a validly subsisting rule could continue despite its repeal or substitution, the Tribunal rejected this argument. The Tribunal upheld the impugned order and dismissed the appeal.

In conclusion, the Tribunal upheld the decision that the compounded excise duty on cotton yarn paid at the time of fabric clearance should not be included in the assessable value of the fabrics. The exclusion of duty from the assessable value was limited to the duty on the fabric itself, as per the relevant provisions of the Central Excises and Salt Act. Additionally, the Tribunal confirmed that proceedings initiated under an omitted rule could still be continued if validly initiated.