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Issues involved: Determination of liability to pay excise duty on dyed worsted woollen yarn after already paying duty on grey yarn, entitlement for set off of the difference in excise duty, interpretation of Notifications 235/76 and 236/76, applicability of Rule 56A of the Central Excise Rules, and consideration of past practices.
Issue 1 - Liability for Excise Duty: The Supreme Court considered whether the appellant is liable to pay excise duty on dyed worsted woollen yarn after already paying duty on grey yarn. The Court noted that separate rates of duties were imposed on grey and dyed yarn in 1966, with different tariff values and duty rates specified in Notifications 235/76 and 236/76. Despite the differential duty, the appellant continued to pay without objection until a notice was issued in 1977 refusing set off. The Department argued that woollen yarn falls under Rule 56A, allowing proforma credit but not set off without permission under sub-rule (2). As the appellant did not obtain such permission, a demand for Central Excise Duty was made under Rule 10, which was confirmed by the Assistant Collector and upheld on appeal. Issue 2 - Set Off Entitlement: The Court examined whether the appellant was entitled to set off under Rule 56A despite not following the procedure in sub-rule (2). The appellant had paid duty on both grey and dyed yarn but did not apply for proforma credit as required by sub-rule (2). Although an amendment in 1981 allowed for condoning procedural defects, it was not applicable to the relevant period of 1976-77. Consequently, the Court upheld the Tribunal's decision to deny set off, as the appellant had not applied for proforma credit, leading to the rejection of the claim. Issue 3 - Precedent and Merit: The Court referenced a previous decision in Empire Industries Ltd. v. Union of India, upheld by a Constitutional Bench, to support its conclusion. The appellant's attempt to distinguish the case based on the type of goods involved was dismissed, as both dyed and grey yarn were recognized as separate goods with distinct levies. Ultimately, the Court found no merit in the appeal and dismissed it accordingly.
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