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TMI Blog1999 (8) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... iable on the cotton yarn could be paid with the duty on the cotton fabrics in whose manufacture such cotton yarn was used. When cotton yarn is used in the manufacture of cotton fabrics, certain wastages of yarn occur. The issue for consideration is whether from the duty leviable on such cotton yarn at the stage of manufacture of cotton fabrics, reduction is permissible to the extent of the duty ascribed to the waste arising after the yarn is taken off, the spindle and used in the weaving of cotton fabrics. The Asstt. Collector of Central Excise, who had adjudicated the matter observed that cotton yarn is fully manufactured, excisable and dutiable item prior to its taking in weaving section for weaving of cotton fabrics. The duty liability i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he spindle stage; it is the concession to assessee to pay duty at the time of clearance of fabric under Rule 49A, subject to payment of interest as specified in the said Rule. The waste generated after the spindle stage at the time of manufacture of the fabric was not covered by the exemption under Notification No. 95/61-C.E. 2. The matter was heard on 11-6-1999 when Shri M. Udhoji, JDR submitted that duty on yarn is leviable when the yarn is manufactured. Its subsequent use in the manufacture of fabrics was towards the levy of duty on fabrics. No exemption could apply, after the stage of levy of duty is already over. He referred to the grounds of appeal in appeal filed by the Revenue and pleaded for restoring the Order-in-Original pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter. Under Notification No. 95/61-C.E., dated 1-4-1961 (as amended) (a) waste cotton twist (b) waste cotton yarn (c) waste cotton thread (d) twist spun from cotton waste (e) yarn spun from cotton waste and (f) thread spun from cotton waste, were extempted from the whole of the duty of excise leviable thereon. It was explained that for the purpose of Notification No. 95/61-C.E., the terms "waste cotton yarn" was to mean :- (1) Short lengths of cotton yarn in tangled mass not capable of being disentangled without considerable labour or (2) Short lengths not exceeding three metres of cotton yarn even if they are not in the form of an entangled mass. 5. Central Excise duty on cotton yarn becomes payable when such cotto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that happens the liability of such manufactured yarn to pay excise duty at the then prevalent rate of duty is crystallised. Thereafter the question as to when subsequently the fabric is manufactured or emerges or is removed from factory gate becomes irrelevant for the purpose of deciding the question of liability of excise duty on such captively consumed yarn". In that case, the yarn was removed for being utilised for captive consumption in the manufacture of fabrics prior to 15-7-1977 when under Notification No. 132/77-C.E., dated 18-6-1977 Yarn was wholly exempted from payment of excise duty. The Apex Court held that such yarn will not be liable to bear any excise duty as per the latter Notification dated 15-7-1977. 6. Thus, after t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he duty on fabrics it cannot be said that the liability to pay excise duty on yarn arose for the first time when the duty was actually paid under the concessional procedure under the Rules 96V and 96W. It was held "on the contrary it must be held that liability to pay excise duty on manufactured yarn arose the moment the manufacturing of yarn was completed at spindle stage (para-9). Similarly in the case of Kamala Mills Ltd., Bombay v. U.O.I. - 1988 (34) E.L.T. 539 (Bombay) the Bombay High Court had observed that the advantage of payment of composite duty is conferred upon the manufacturer as a special procedure and it merely postpones the stage of collection of duty but that cannot be confused with the liability to pay duty which arises o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein similar facts and the same Notification No. 95/61-C.E., dated 1-4-1961 cameup for consideration before the three Member Bench of the Tribunal. Under their Order Nos. 218 and 218A/86-D, dated 14-4-1986 the Tribunal observed that the Rule 49A envisaged only a postponement of the collection of duty leviable on cotton yarn till the stage of clearance of cotton fabrics made therefrom and that the postponed duty leviable on the cotton yarn was to be included in the duty leviable on the fabrics. Notification No. 95/61-C.E., dated 1-4-1961 was for consideration before the Tribunal. In the appeal filed by the Revenue, it had been pleaded that the respondents, M/s. Raj Kumar Mills were liable to pay duty on the entire quantity of yarn issued fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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