2001 (1) TMI 343 - AT - Central Excise

Summary

Issues:
Assessment of woollen yarn for duty exemption under different serial numbers of notifications; Interpretation of notification regarding duty rates based on yarn form; Classification of yarn for duty calculation; Whether conversion into cone form amounts to manufacture attracting duty.

Analysis:
The case involved the assessment of woollen yarn for duty exemption during a specific period based on Notification No. 26/94 as amended by Notification No. 90/94. The appellant manufactured woollen yarn and used it for making carpets. The dispute arose as the appellant claimed exemption under Sl. No. 1A for yarn produced in plain reel hanks, while the authorities assessed it under Sl. No. 1B attracting 10% ad valorem duty due to the yarn being in cone form. The appellant argued that conversion into cone was part of carpet manufacturing and not dutiable. They relied on previous tribunal decisions and legal principles that conversion alone does not constitute manufacture attracting duty.

The Tribunal analyzed the notifications and found that yarn in plain reel hanks was exempt under Sl. No. 1A, while yarn in any other form attracted duty under Sl. No. 1B. Since the yarn had been converted into cone form, it no longer qualified for the exemption under Sl. No. 1A and was liable for duty under Sl. No. 1B. The Tribunal distinguished the appellant's case from the precedent where goods were removed in plain reel hanks, emphasizing that the conversion stage was crucial for duty liability. The Tribunal concluded that the manufacturing activity had progressed to the cone form stage, making the yarn dutiable under Sl. No. 1B, and upheld the duty demand.

In light of the above analysis, the Tribunal rejected the appellant's appeal, emphasizing that the conversion into cone form attracted duty as per the relevant notification. The Tribunal clarified that the cited decisions by the appellant's counsel were not applicable to the present case, as the crucial factor was the stage of manufacturing at which duty liability arose. The judgment highlighted the distinction between yarn in different forms for duty calculation purposes and upheld the duty demand based on the specific form of the yarn at the relevant stage of production.