1998 (6) TMI 153 - AT - Central Excise

Summary

Issues:
Eligibility for exemption under sub-heading No. 5107.23 of the Central Excise Tariff, interpretation of the certificate from the Khadi and Village Industries Commission, distinction between Khadi and handloom fabrics, approval by the Government for the purpose of development of handlooms, imposition of penalty.

Eligibility for Exemption:
The appeal involved the eligibility of M/s. Khadi Mandir Unifinishing Plant for the benefit of exemption under sub-heading No. 5107.23 of the Central Excise Tariff. Both the Dy. Collector of Central Excise and the Collector of Central Excise (Appeals) had ruled against the appellants, stating they were not an approved organization by the Government for the development of handlooms, as required by the Tariff.

Interpretation of Certificate:
The appellant relied on a certificate from the Khadi and Village Industries Commission, claiming it as approval by the Government for handloom development. However, the Respondent argued that the certificate did not signify approval for handloom development as per the Tariff entry. The Tribunal analyzed the certificate and concluded that it did not accord approval for the appellants' unit for the purpose of handloom development.

Distinction Between Khadi and Handloom Fabrics:
The Tribunal clarified the distinction between Khadi and handloom fabrics. While Khadi requires both spinning of yarn and weaving of fabric without power, handloom fabrics do not have such restrictions. In handloom fabrics, there is no condition that the yarn used for weaving should be spun without the aid of power, unlike Khadi.

Approval for Development of Handlooms:
The relevant Tariff entry under Heading No. 5107.23 specified that processed fabrics with power aid should be by a factory approved by the Government for handloom development. The Tribunal found that the certificate provided by the appellants did not meet the criteria of Government approval for handloom development, as required by the Tariff entry.

Imposition of Penalty:
Regarding the penalty imposed, the Tribunal reduced the amount from Rs. 10,000 to Rs. 5,000, considering the circumstances of the case. Despite the penalty reduction, the appeal was rejected. The decision was made after careful consideration of the arguments presented and in line with the findings on the eligibility for exemption and approval for handloom development.

In conclusion, the Tribunal upheld the decision that the appellants were not eligible for the exemption under sub-heading No. 5107.23 of the Central Excise Tariff due to the lack of Government approval for handloom development. The penalty imposed was reduced, but the appeal was ultimately rejected based on the interpretation of the relevant Tariff entry and the certificate provided by the appellants.