1991 (3) TMI 276 - AT - Central Excise

Issues:
1. Whether the appellant company is liable to pay excise duty on waste cotton yarn.
2. Whether the demand for excise duty on waste cotton yarn is barred by limitation.
3. Interpretation of Notification No. 95/61-C.E. regarding exemption of waste cotton yarn.
4. Application of Rule 49A of the Central Excise Rules in determining excise duty liability.

Analysis:

Issue 1: Liability to pay excise duty on waste cotton yarn
The case involved the appellant company manufacturing cotton yarn, facing a show cause notice for alleged non-payment of excise duty on 3,16,689 Kgs. of cotton yarn that did not go into weaving of fabrics. The Assistant Collector confirmed the demand under Rule 10(i) of the Central Excise Rules, stating that if duty had been paid at the spindle stage, there would have been no duty liability on the waste arising during weaving. The duty was calculated based on the highest count of yarn manufactured by the appellants due to the absence of data on waste yarn cleared countwise. The Collector of Central Excise (Appeals) upheld the duty liability but limited the demand to a six-month period, considering the absence of provisions for charging duty at a higher rate. The Tribunal rejected the appeal, citing previous decisions on waste yarn during sizing and weaving, concluding that the waste cotton yarn arising during weaving is not exempt from duty.

Issue 2: Limitation on demand for excise duty
The Collector of Central Excise (Appeals) restricted the demand for excise duty on waste cotton yarn to a six-month period, citing the normal time limit under Rule 10 of the Central Excise Rules. The limitation issue was considered in the context of the duty liability calculation based on the actual count of yarn used in manufacturing fabrics. The Tribunal did not find merit in the appellant's argument regarding the limitation period and upheld the decision of the lower appellate authority.

Issue 3: Interpretation of Notification No. 95/61-C.E.
The appellant argued that the exemption under Notification No. 95/61 for waste cotton yarn was not restricted to a specific stage of production. They relied on a Tribunal judgment regarding waste yarn during sizing. However, the Tribunal differentiated waste yarn during sizing from waste cotton yarn during weaving, emphasizing that the exemption under the notification did not extend to waste arising during the weaving process. The Tribunal rejected the appellant's interpretation, affirming the duty liability on waste cotton yarn.

Issue 4: Application of Rule 49A of the Central Excise Rules
The appellant contended that Rule 49A, postponing the levy of duty on yarn until the fabric stage, should also apply to waste cotton yarn arising during weaving. They argued that the duty liability on waste yarn should be postponed like the yarn itself. However, the Tribunal upheld the duty demand on waste cotton yarn, emphasizing the distinction between yarn and waste arising during the weaving process, thereby rejecting the appellant's argument.

In conclusion, the Tribunal rejected the appeal, affirming the duty liability on waste cotton yarn arising during the weaving process and upholding the decision of the lower appellate authority regarding the limitation period and duty calculation methodology based on the actual count of yarn used in fabric manufacturing.

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