1996 (9) TMI 399 - AT - Central Excise

Summary

Issues:
Demand of duty on tow and tops out of which polyester fiber was manufactured and cleared under exemption Notification 191/85, interpretation of Notification 84/87 regarding duty payment, applicability of subsequent Notification 76/92 exempting duty on tow used for fiber supplied to KVIC.

Analysis:

The appeal concerns the demand of duty on tow and tops out of which polyester fiber was manufactured and cleared under exemption Notification 191/85. The lower appellate authority held that since polyester fiber was cleared without payment of duty under the exemption notification, tow would not be entitled to the benefit of exemption under Notification 84/87. The appellant's consultant argued that the exemption for polyester fiber under Notification 191/85 was intended to meet specific requirements of units under the Khadi and Village Industries Corporation, and charging duty on tow would nullify the effect of the exemption. He contended that duty payment on tow would make polyester fiber eligible for duty-free clearance, and vice versa under different notifications.

The respondent's representative argued that tow is a separate commodity under the tariff and can only be cleared without duty if there is an exemption in place at the relevant time. Notification 84/87 allows duty-free clearance of tow only if the polyester fiber manufactured from it is cleared after payment of duty. Since the polyester fiber in question was cleared without duty under Notification 191/85, the tow related to it should be cleared with duty, as per the respondent's argument.

Upon considering both parties' arguments, the tribunal observed that the Government issued Notification 191/85 to exempt polyester fiber supplied to KVIC for social welfare. The duty levy under Tariff Heading 5501.20 was either at the tow stage or staple fiber stage, with only one stage levy of duty envisioned by the framers of the statute. The tribunal interpreted that the exemption under Notification 191/85 should be understood in the context of duty payable at either the tow or staple fiber stage. The tribunal concluded that no duty would be chargeable on tow used in manufacturing polyester fiber cleared without duty under Notification 191/85.

The subsequent Notification 76/92, issued to exempt duty on tow used for fiber supplied to KVIC, was deemed clarificatory and held to have retrospective effect. Consequently, the tribunal allowed the appeal in favor of the appellant, based on the interpretation of the notifications and the levy of duty at different stages in the manufacturing process.