1998 (9) TMI 190 - AT - Central Excise

Summary

Issues:
1. Whether the manufacturer of cotton or polyester yarn can discharge Central Excise duty liability by paying duty at the single yarn manufacturing stage and then double-fold/multi-fold that yarn in their factory without paying duty again upon clearance?
2. Whether the duty is chargeable on the form and value of goods at the time of removal from the factory, specifically in the case of double-fold/multi-fold yarn?
3. Whether duty liability arises at the off-spindle stage of yarn manufacture or only at the single yarn manufacturing stage?
4. Whether the approved procedure by the Commissioner estops the Revenue from demanding duty at the double-fold/multi-fold stage?
5. Whether double-fold/multi-fold of yarn constitutes a new product that is liable for duty?

Analysis:
1. The primary issue in this case revolves around the Central Excise duty liability of yarn manufacturers. The question is whether the duty paid at the single yarn manufacturing stage suffices, or if duty must be paid again upon double-fold/multi-fold yarn clearance. The appellants argue that duty payment at the single stage is adequate, citing the Central Excise Valuation Rules and the costing method.

2. The Revenue contends that duty is chargeable based on the form and value of goods at the time of removal from the factory. They issued a show cause notice asserting that duty is payable on double-fold/multi-fold yarn as it is the form in which the goods are removed. The demand for duty was made within the statutory time limit of six months from the duty payment date.

3. The appellants argue that duty liability arises at the off-spindle stage of yarn manufacture, relying on a change in accounting system by the Commissioner and a Supreme Court judgment. They assert that duty payment at the single yarn stage is sufficient, as doubling or multi-folding does not create a new product liable for duty.

4. The appellants further rely on a procedure approved by the Commissioner, which they argue estops the Revenue from demanding duty at the double-fold/multi-fold stage. The approved procedure outlines the duty payment process and clearance of processed yarn without additional duty payment.

5. The debate also involves whether double-fold/multi-fold yarn constitutes a new product subject to duty. The appellants argue that such processing does not create a new product, citing a Supreme Court judgment. The Tribunal ultimately rules in favor of the appellants, stating that the duty payment at the single yarn stage suffices, and the demand for duty at the double-fold/multi-fold stage is not valid.