2000 (11) TMI 790 - AT - Central Excise

Issues Involved:
1. Classification of the yarn.
2. Benefit of exemption notification.
3. Limitation period for demanding central excise duty.

Detailed Analysis:

1. Classification of the Yarn:

The core issue revolves around the classification of the yarn doubled with polyester/viscose blended spun yarn and polyester/viscose filament yarn. The Commissioner of Central Excise (Appeals) classified the finished doubled yarn under sub-heading No. 5504.22 or 5506.21 of the Central Excise Tariff (CET). The Department, however, argued that it should be classified under sub-heading No. 5504.29 or 5506.29, which would attract a higher duty rate.

M/s. Tirupati manufactured spun yarn, which was classified under sub-heading Nos. 5504.22 and 5506.21. No duty was paid on these yarns before they were used for doubling with filament yarns purchased from the market without duty-paying documents. The Department contended that the resultant doubled yarn should be classified under sub-heading Nos. 5504.29 and 5506.29 due to the presence of filament yarn, a textile material.

The Tribunal noted that the Commissioner of Central Excise (Appeals) did not provide a detailed discussion on the classification issue. It cited various precedents, including the Supreme Court's decision in Aditya Mills Ltd. v. U.O.I., which held that doubling of yarns creates a new product subject to classification under a different heading. The Tribunal concluded that the matter should be re-examined by the Commissioner of Central Excise (Appeals) to provide a detailed and reasoned order.

2. Benefit of Exemption Notification:

M/s. Tirupati claimed the benefit of exemption under Notification No. 47/90-C.E., which provides a NIL rate of duty for doubled or multifold yarn manufactured from duty-paid yarn falling under Chapters 52, 54, or 55 of the CET. However, the Commissioner of Central Excise (Appeals) denied this benefit, as M/s. Tirupati had not paid duty on the yarn used for doubling, and the filament yarn was purchased without duty-paying documents.

The Tribunal upheld this decision, emphasizing that the exemption was correctly denied because the necessary conditions for availing the exemption were not met.

3. Limitation Period for Demanding Central Excise Duty:

The Commissioner of Central Excise (Appeals) upheld the invocation of the extended period of limitation for demanding duty, citing suppression of facts by M/s. Tirupati. The Tribunal agreed with this finding, noting that M/s. Tirupati had not declared the use of filament yarn in their records and had misleadingly described filament yarn as "fibres" in the raw material receipt register.

The Tribunal referenced the Supreme Court's observations in various cases, including Jaishri Engineering Co. (P) Ltd. v. CCE, to support the conclusion that suppression of facts justified the extended limitation period.

Conclusion:

The Tribunal allowed the appeal filed by the Revenue by way of remand for re-examination of the classification issue by the Commissioner of Central Excise (Appeals). It rejected the appeal filed by M/s. Tirupati, upholding the denial of the exemption benefit and the invocation of the extended period of limitation for demanding duty.

← Previous Next →