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Issues: Interpretation of Notification No. 217/86 regarding exemption for tea manufactured in the same factory, and the applicability of Notification No. 193/86 on duty payment for package tea.
In this case, the respondents were engaged in manufacturing black tea and package tea. The dispute revolved around the interpretation of Notification No. 217/86, which provided exemption for tea manufactured in a factory and used within the factory of production. The department argued that since black tea and package tea were produced in different units, the exemption did not apply. On the other hand, the respondents contended that the term "factory of production" referred to the factory producing package tea, making them eligible for the exemption. The Tribunal analyzed the language of the notification and concluded that the exemption under Notification No. 217/86 applied only when both types of tea were manufactured in the same factory. As package tea was not produced in the same factory as black tea in this case, the respondents were not entitled to the exemption. Regarding the application of Notification No. 193/86, the assessee argued that they correctly paid duty for package tea at the rate specified in the notification, considering that black tea was exempt under Notification No. 217/86. Citing a precedent from the Bombay High Court, the assessee contended that the duty payable should consider exemptions in connection with the relevant tariff entry. However, the Tribunal found that the duty exemption for black tea did not automatically apply to package tea under Notification No. 193/86. The Tribunal upheld the department's argument that the duty rate specified in the notification applied to package tea, irrespective of the exemption for black tea under a different notification. Consequently, the Tribunal allowed the department's appeal and set aside the previous order in favor of the respondents.
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