2013 (4) TMI 434 - AT - Central Excise

Classification under Central Excise Tariff Act, 1985 - Demand of duty - The respondents paid duty at the spindle stage and also conducted pre-weaving process - The duty is on ad valorem basis should pay the duty on the value including all expenses incurred - Held that - We find that sizing is not covered under any of the Notifications prevailing during the period of dispute in these appeals - Duty is liable to be paid on the value of sized yarn by the appellants during the relevant period. Similar view was taken by the Tribunal in the case of Mafatlal Industries Ltd. v. C.C.E.(2004 (6) TMI 429 - CESTAT, MUMBAI). We accordingly, hold that duty on sized yarn falling under Chapters 52 and 55 of Tariff is payable at ad valorem rates - We set side the Orders-in-Appeal dropping the demand pertaining to the process of sizing. However, we uphold the Orders-in-Appeal dropping the demand on account of other processes - The matter is remanded back to the original authority

Issues Involved:
1. Rejection of Classification List.
2. Demand of duty on different types of yarn for different periods.
3. Applicability of Notifications No. 71/94 and 35/95.
4. Whether the process of sizing amounts to manufacture and its duty implications.

Issue-wise Detailed Analysis:

1. Rejection of Classification List:
The appeals E/1121/96 and E/1338/96 pertain to the rejection of the Classification List (C.L.). The Tribunal noted that the respondents were engaged in the manufacture of various types of yarn and fabrics falling under Chapters 52 and 55 of the Central Excise Tariff Act, 1985. The jurisdictional officers issued show-cause notices arguing that the duty should be paid on the value including all expenses incurred by the respondents on several processes conducted up to the date of clearance. The Tribunal found that the Commissioner of Central Excise (Appeals) had allowed the respondents' appeals and dismissed the Revenue's appeals. The Tribunal upheld this decision, indicating that the rejection of the Classification List by the Revenue was not sustainable.

2. Demand of Duty on Different Types of Yarn for Different Periods:
The Tribunal addressed the demand of duty on cotton yarn, cellulosic spun yarn, and non-cellulosic spun yarn for the period 1-8-1994 to 31-8-1995. The Revenue contended that the duty should be paid on an ad valorem basis, including the value of all processes conducted by the respondents. The Tribunal found that prior to 1-3-1994, the duty on yarn was at a specific rate, and from 1-3-1994, it was changed to an ad valorem rate. The Tribunal upheld the Commissioner's decision to drop the demand for processes other than sizing, as these were exempted under the relevant notifications.

3. Applicability of Notifications No. 71/94 and 35/95:
The Tribunal examined the applicability of Notification No. 71/94, dated 23-3-1994, and Notification No. 35/95, dated 16-3-1995. It was found that these notifications exempted certain processes like beaming, warping, reeling, and winding from duty if produced out of duty-paid yarn. However, the process of sizing was not covered under these exemptions. The Tribunal concluded that the processes other than sizing were exempted, and therefore, the demand for duty on these processes was not sustainable.

4. Whether the Process of Sizing Amounts to Manufacture and Its Duty Implications:
The Tribunal focused on whether the process of sizing amounts to manufacture and its duty implications. It was noted that Chapter Note 1 of Chapter 52 (prior to 26-5-1995) included sizing as a process amounting to manufacture. The Tribunal found that the process of sizing was not exempted under any of the relevant notifications during the disputed period. Therefore, duty was liable to be paid on the value of sized yarn by the respondents. This view was supported by the Tribunal's decision in the case of Mafatlal Industries Ltd. v. C.C.E., Mumbai. Consequently, the Tribunal set aside the Orders-in-Appeal dropping the demand pertaining to the process of sizing and remanded the matter back to the original authority for quantification of duty on the sized yarn.

Conclusion:
The Tribunal upheld the Orders-in-Appeal dropping the demand on account of processes other than sizing and set aside the Orders-in-Appeal dropping the demand pertaining to the process of sizing. The matter was remanded back to the original authority for quantification of duty on yarn falling under Chapters 52 and 55 of the Tariff during the disputed period with regard to the process of sizing only, after providing an opportunity of being heard to the respondents. The appeals were disposed of accordingly.

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