1997 (5) TMI 145 - AT - Central Excise

Summary

Issues: Interpretation of Notification No. 224/77 regarding duty on yarn in a composite mill and applicability of exemption notification to waste generated during processing.

The judgment revolves around a dispute concerning the duty levied on cotton yarn in a composite mill and whether the waste generated during processing prior to weaving is eligible for exemption under Notification No. 224/77. The department contended that duty on yarn issued for weaving was leviable at the spindle stage, and hence, the waste occurring before weaving was not exempt. The Assistant Commissioner initially dismissed the demand, citing that duty on yarn in a composite mill was not chargeable at the spindle stage and that the demand was barred by limitation. The Collector (Appeals) upheld this decision, prompting the Revenue to file an appeal.

During the hearing, the Bench raised concerns about the authorization given by the Collector, which was later deemed proper after reviewing relevant note-sheets. The argument presented by the Revenue was based on the interpretation of Tariff Item No. 18A and the contention that duty on yarn extended to various forms, including yarn on warp beams. The respondents relied on a Tribunal judgment to support that the character of the impugned goods remained cotton yarn despite the transformation in form. The Revenue argued that the wastage occurred after the yarn had moved to the weaving shed, making it ineligible for exemption under a previous Tribunal judgment.

Upon careful consideration of the documents and submissions, the Tribunal analyzed Notification No. 224/77 and found that the presumption that duty was leviable on cotton yarn at the spindle stage had no basis. The Tribunal noted that the waste generated during the processing stages preceding weaving was entitled to duty-free clearance under a specific notification. As the waste occurred before the weaving stage, the Tribunal concluded that the Revenue's claim was not sustainable. Additionally, since no argument was presented regarding the demand being time-barred, the lower orders dismissing the demand were upheld, and the Revenue's appeal was dismissed.