2001 (4) TMI 565 - AT - Central Excise

Yarn spindle stage - Duty liability - Set-off - Duty liability - Demand - Limitation - Penalty

Summary

Issues:
- Duty liability on single yarn at spindle stage
- Time-barred demand
- Imposition of penalty

Duty liability on single yarn at spindle stage:
The appellants, engaged in cotton yarn manufacturing, were found not to have paid central excise duty on single yarn consumed captively for making doubled/multi-folded yarn during a specific period. The Commissioner confirmed a duty demand and imposed a penalty, leading to the appeal. The appellants argued that duty was being paid on doubled/multi-folded yarn, not on single yarn, citing that doubling/multi-folding did not create a new product. They referred to relevant case laws to support their contention. The Tribunal noted that duty on single yarn at the spindle stage was required as per a Supreme Court judgment, but since single yarn and doubled/multi-folded yarn fell under the same heading, the duty already paid on the latter could be adjusted. The Assistant Commissioner was directed to quantify duty on single yarn and adjust the duty paid on doubled/multi-folded yarn accordingly.

Time-barred demand:
The appellants claimed the demand was time-barred as the Show Cause Notice (SCN) was issued after a significant period. They argued a bona fide belief that duty was payable on the yarn as cleared from the factory. However, the Tribunal found that the issue of treating doubling/multi-folding as manufacture arose later than the material period in this case. Additionally, there was no indication in the records that only doubled/multi-folded yarn was being cleared, making the demand not time-barred.

Imposition of penalty:
Considering the circumstances and the duty adjustment, the Tribunal held that the penalty would be applicable only on the differential duty amount after the adjustment. The penalty rate was set at 10% of the calculated differential duty amount. The appeal was disposed of with these determinations.

This judgment delves into the duty liability on different stages of yarn production, the aspect of time limitation for duty demands, and the imposition of penalties based on the adjusted duty amounts. The Tribunal's analysis of relevant legal precedents and the specific facts of the case led to a detailed decision on each issue raised by the appellants, providing clarity on duty payment obligations and penalty assessments.