2023 (5) TMI 239 - AT - Central Excise

Levy of Excise Duty - process amounting to manufacture or not - folded yarn/doubled yarn/ply yarn was made out of single yarn stage - intermediate stage of production - ex-parte order - opportunity of personal hearing not provided - It is the case of the Appellant that cotton yarn in straight reel hank falling under heading 52.03 of the Schedule to the Central Excise Tariff Act, 1985 was exempted from payment of Central Excise duty - HELD THAT - The Department had demanded duty on the cotton yarn in view of the Chapter Note I to Chapter 52 of CETA, 1985 on the ground that products covered under Heading No. 52.03, sizing, beaming, warping, winding or reeling or any one or more of these processes for conversion of any form of the said products into another form of such product amounted to manufacture and on the ground that since the stage in which it was actually removed by the said assessee i.e. straight reel hank cotton yarn exempted from duty of excise, therefore the duty was not leviable since final product is exempted vide Notification No. 187/83 dated 09.07.1983. Undisputedly Cotton Yarn in straight reel hank falling under heading NO. 52.03 of the Schedule to the Central Excise Tariff Act, 1985 was exempted from payment of Central Excise duty. There is also no dispute in the present case that the Appellants had cleared the cotton yarn in straight reel hank and prima facie it is found that their case is covered by the judgment of this Tribunal in the case of ARATI COTTON MILLS VERSUS COMMISSIONER OF C. EX., CALCUTTA-II 2000 (9) TMI 536 - CEGAT, KOLKATA , wherein the Tribunal held The identical definition which was already in existence under Section 2(f) was considered by the Bench and it was held that conversion of one stage of yarn into another will not amount to manufacture. It is also seen that hank yarn is obtained as a result of continuous process of manufacture in which the winding of bobbin is only an intermediary process. As such we do not find any reasons to take a different view than the one taken by the Tribunal In the earlier decisions - The facts of the present case are squarely covered by the aforesaid decision of the Tribunal. The impugned order cannot be sustained and is accordingly set aside - Appeal allowed.

Summary

Issues Involved:
The issues involved in the judgment are whether the Appellant is liable to pay Central Excise duty for the manufacture of cotton yarn, and whether the decision-making process of the Ld. Commissioner(Appeals) was arbitrary.

Issue 1: Liability to Pay Central Excise Duty

The Appellant, engaged in the manufacture of 100% cotton yarn, argued that the conversion of unsized yarn into sized yarn does not attract Central Excise duty as the final product remains yarn. The Department alleged that the Appellant manufactured cotton yarn in spindle point without paying duty. The Adjudicating authority held that the bobbins/cones were not removed from the factory but transferred for the manufacturing of the final product. The Tribunal found that the cotton yarn in straight reel hank, exempted from duty, was the final product. The Tribunal referred to previous decisions where it was held that the conversion of yarn from one stage to another does not amount to manufacture, as yarn remains yarn throughout the process.

Issue 2: Arbitrariness in Decision-Making Process

The Appellant contended that the Ld. Commissioner(Appeals) passed the order ex parte without granting a personal hearing. Despite submitting written submissions, they were not considered before the order was passed. The Appellant argued that the Commissioner should have refrained from deciding the appeal since he had reviewed the original order. The Appellant emphasized that cotton yarn in straight reel hank was exempt from Central Excise duty, and the Commissioner's decision was arbitrary. The Ld. Authorized Representative for the Department defended the impugned order, stating that the appeal lacked merit.

The Tribunal reviewed the appeal records and found that the Appellant's case fell within the exemption of cotton yarn in straight reel hank from Central Excise duty. The Tribunal set aside the impugned order, concluding that the Appellant was not liable to pay the duty. The Appeal filed by the Appellant was allowed, and the impugned order was overturned.