2000 (4) TMI 361 - AT - Central Excise

Summary

Issues:
1. Benefit of exemption Notification No. 25/95 to cotton yarn and Notification No. 26/94 to flax yarn.
2. Interpretation of Section Note 2(A) of Section XI of the C. Ex. Tariff Act, 1985.
3. Application of Supreme Court judgment in Rajasthan Spg. and Wvg. Mills Ltd. v. C.C.E., Jaipur.
4. Distinction between different types of non-cellulosic spun yarn for exemption eligibility.

Analysis:
1. The dispute in the present appeal revolves around the benefit of exemption under Notification No. 25/95 for cotton yarn and Notification No. 26/94 for flax yarn. The appellants argue that the blended cotton yarn fabric and blended flax yarn fabric should be treated as cotton fabric and flax fabric, respectively, based on the predominance of cotton in the product. They rely on a previous Tribunal decision regarding Notification No. 57/87, where it was held that blended cotton yarn fabric should be treated as cotton fabric under Section Note 2(A) of the C. Ex. Tariff Act, 1985. The appellants seek to apply the same reasoning to the current case for a favorable outcome.

2. The Senior Advocate for the respondents cites the Supreme Court judgment in Rajasthan Spg. and Wvg. Mills Ltd. v. C.C.E., Jaipur, which limited the exemption under Notification No. 332 of 1977 to polypropylene spun yarn only, excluding blends with other fibers. The respondents argue that based on this precedent, the benefit of the Notifications in the present case should not extend to the appellants. Additionally, a reference application by the Department against a previous Tribunal order is pending before the High Court, adding complexity to the legal landscape.

3. In response, the appellants distinguish the present case from Rajasthan Spg. and Wvg. Mills Ltd. by highlighting that the specific classification of blended cotton yarn under heading 52.06 as cotton yarn, in conjunction with Section Note, sets it apart. They emphasize that the Supreme Court's ruling was specific to polypropylene spun yarn under a different tariff item, whereas the current scenario involves blended cotton yarn falling under a distinct classification, making the cases factually dissimilar.

4. The Tribunal, after considering the arguments from both sides, notes that the Commissioner did not take into account a previous Tribunal order that favored the appellants' position. Given the similarity in issues with the earlier case, the Tribunal decides to unconditionally allow the stay petition, suggesting a favorable stance towards the appellants' interpretation of the exemption Notifications. Financial hardship was not raised as a factor by the appellants during the proceedings.

By analyzing the various legal arguments, interpretations of statutory provisions, and precedents cited by both parties, the Tribunal's decision to grant the stay petition reflects a nuanced understanding of the complex issues surrounding the benefit of exemption Notifications for cotton and flax yarn products.