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TMI Blog2000 (9) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... to the said notification which is as under :- Provided that the exemption contained hereinabove relating to Sl. No. 1 2 shall not apply to clearances of yarn from a factory having facilities (including plant and equipment) for producing single yarn. 3. While Revenue contends that the said provision bars the applicability of this exemption contained in the said Sl. Nos. to any doubled or multifolded yarn manufactured by such composite mill irrespective of whether it was cleared for captive consumption or for home consumption, appellants contend that the proviso should be interpreted to mean that when such yarn is captively consumed, the exemption would be available but would be deniable only when it is removed from the factory gate for home consumption. 4. In Appeals other than E/777/99, of M/s. Coats Viyella (India) Ltd., an additional point that has been raised is that the appellant therein had always claimed exemption under Sl. No. 5 of this very notification and not under Sl. No. 1 2 only. In this respect, appellants claim that the doubled/multifolded yarn manufactured by them does not become goods since such yarn cannot be considered as goods until the same is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 96 (83) E.L.T. 278 (Bom.) relied upon by Revenue had not considered the concept of captive consumption at all but had only considered the situation where yarn was removed into the open market and therefore the same stood distinguished on facts. He also referred to the definition of factory in Section 2 of the Act. (e) He contested that while interpreting the said proviso the words from a factory having facilities (including plant and machinery) for producing single yarn would not be the correct interpretation as the principal fact related to clearances of yarn from such a factory i.e. a factory having facilities for producing single yarn. The net effect of this was that the words clearances of yarn cannot be disjointed from the words from a factory nor can the words from a factory only be linked to the subsequent words as mentioned. Thus, the correct interpretation would be that whenever the goods are cleared from a factory for sale to the market, by a composite mill, duty would have to be paid because the said clearance from the factory would mean clearance from the factory gate. The paramount words in this are clearances on sale from a factory . (f) In view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t been considered. (c) While the show cause notice has proposed the demands based on the non-availability of Sl. Nos. 1 2 of the said notification in view of the proviso contained therein, all along this appellant has claimed exemption in their declarations made under the revised Rule 173B for exemption under Sl. No. 5. The impugned notice does not give any reasons as to why the said Sl. No. 5 would not be applicable in their case. Though their removals under the said Sl. No. were approved when their RT-12 returns were assessed from time to time as no remarks are made in that RT-12s disputing the availability of the said exemption under Sl. No. 5 of this very notification. Therefore, amplifying this argument, he submitted that in view of the clarification issued by the Director in the office of the Textile Commissioner, double/manifolded yarns become goods only when it is wound and since winding is exempt under Sl. No. 5 of the said notification, therefore no duty would be leviable on doubled/multifolded yarn wound on reels irrespective of the fact whether it was removed for captive consumption or for sale in the open market. (d) He submits that as far as the allegation in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... folded yarn became excisable goods not immediately when it was doubled or multifolded on the machine but only when it was wound on the reels. Serial No. 5 of the notification did not exempt freshly manufactured new type of goods like doubled/multifolded yarn merely because they became goods only after being wound on reels etc. The object of Revenue behind the said Serial number was to avoid the double incidence of duty on yarn which had suffered duty when it was subjected to the processess mentioned therein which included winding on reels etc. In this case, even if it is held that the process started with duty paid single yarn, however what was wound on reels was not single yarn (duty paid) but a new product called doubled/multifolded yarn . Therefore duty should not claim to be exempted on this merely because of the fact of winding. This was an illogical interpretation of the exemption contained in Sl. No. 5. 10. We have carefully considered the submissions and records of the case. Availability of Sl. No. 1/2 of Notification being common to both appeals, it is taken up first. Ld. Advocate submitted on the correct construction of the words in the proviso, which all concede does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. Advocate s this very argument lets his case down. (e) We cannot be a party to a position where on a hair splitting and rhetorical argument, this clear intention is negated and a pandora s box is opened in favour of composite mills and to the utter detriment of the smaller independent spinners on the ground that the phrase from a factory would supercede in importance and significance than the words clearances ..factory having facility of more than spinning. Such hair splitting or fragmentation is a dangerous path to adopt. We read the proviso in its entirety and conclude that the words from a factory cannot be read in isolation of the phrase following it. Therefore, since clearance would include removal for captive consumption, when the entire proviso is plainly read together and at one go, the only conclusion reached is that it denies exemption to composite mills on all yarn so produced by them and cleared for either captive consumption or home consumption. (f) While coming to this conclusion, we are not influenced by the fact that Rules 9 49 were amended later and may not have retrospective effect. We have not and need not address ourselves to this question in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this manufacturing process is not complete till the yarn is either made into hanks or wound on a core . We do not dispute this fact. But our objection to ld. Vice-President s argument is on the ground that this exemption is not for manufacture of doubled/multifold yarn, which is what they do. On the other hand, the said exemption is to a much simpler process than such a manufacture - - a mere process of beaming, reeling etc. where the machinery employed is relatively cheap, the technology very simple and the producer merely so re-winds the yarn for making it suited for further use of weaving. Above all, the yarn remains the same duty paid yarn. Therefore, to avoid confusion and litigation, Govt. has bestowed an exemption on the goods arising out of this simple process. We cannot misinterpret this exemption and make it available to manufacture of doubled/multifolded yarn which involves - (a) more intricate machinery, (b) more sophisticated technology and (c) where the resultant yarn has acquired a new and distinct identity from the single yarn used as input. While arriving at this conclusion, we also take note of the fact that even doubled/multifold yarn cannot be used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o this question! It is well laid down law that any assessee can claim benefit of an exemption notified and if there are more than one such notifications or grounds therein, he has a choice of claiming either a specific exemption, or both. But what is equally well laid down law is that Revenue cannot force the appellant to choose any particular exemption. To claim any exemption is his prerogative. The facts in these appeals are appellants all along claimed under Sl. No. 5 (much before issue of notices) whereas these notices seek to deny on Sl. Nos. 1 2 only. Since there is no meeting point between the two positions, even though we have ruled on merits on all the three serial numbers of this notification, we find that the matter in these appeals need to be remanded to the original authority for the following reasons :- (a) Appellants have claimed that both in their declaration under Rule 173B and in their G.P.1 and RT 12s, exemption was availed of under Sl. No. 5 of said exemption. From records before us, we cannot verify this. Therefore the original authority needs to verify this claimed position and reconsider the same. (b) If appellants claim at (a) above is found to be tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iginal authority for de novo consideration, after hearing the party, in terms of directions recorded above. (ii) Appeal No. E/777/99 (M/s. Davangere Cotton Mills) is dismissed. Sd/- (V.K. Ashtana) Member (Technical) 21. [Order per : S.L. Peeran, Member (J)]. - I have carefully considered the findings recorded by my ld. brother in the noted appeals. However, I could not persuade myself despite due deliberations with regard to the final outcome of the appeal. I am of the considered opinion that the Revenue appeals against Coats Viyella (India) Ltd. is required to be rejected for the reasons to be recorded and the Revenue appeals are to be applied in toto to the appeals filed by Davangere Mills as the issue being common and their appeals are required to be allowed for the following reasons :- 22. In the case of M/s Coats Viyella (India) Ltd., the Revenue is aggrieved with the common order passed by the Commissioner (Appeals), Trichy in Order-in-Appeal No. 4 to 20/98 disposing of 17 appeals filed by the party before him. A few facts are necessary for the purpose of dealing with this matter :- The assessee is engaged in the manufacture of cotton yarn on var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered Apex Handloom Co-operative Society, the National Handloom Development Corporation or a State Govt. Handloom Development Corporation, and the payment for which is made by cheque drawn by such Co-operative Society or Corporation, as the case may be, on its own bank account . 23. The Commissioner (Appeals) in the impugned order has noted that duty has been paid on the single yarn, however, the said duty was paid at the time of clearance of fabrics in terms of proviso to Rule 49A of the Central Excise Rules which provides for such a contingency as duty can be paid at the time of clearance of the goods and in the assessee s case as there was continuous process from yarn to fabrics stage, therefore the duty on the single yarn was postponed and paid at the time of clearance of fabrics in terms of Rule 49A. Therefore, he has noted that the lower authority s plea to deny the benefit on the belief that duty has not been paid on single yarn as it was postponed till the clearance and paid at the time of clearance of fabrics is not in keeping with the terms of Rule 49A. On this aspect of the matter, my ld. brother in the order has concurred with the Commissioner (Appeals) s findings and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve come into existence for excisability and dutiability purposes. It cannot be concluded that the yarn which was subjected to the processes indicated in Sl. No. 5 was a double/multifold yarn already come into existence and it had not suffered duty and those processes were independent of the processes of double/multifold yarn. In my opinion, the processes indicated in Sl. No. 5 like beaming, warping, wrapping, winding or reeling or any one or more of these process are processes connected with manufacture of double/multifold yarn. Only after these processes have been completed, a double/multifold yarn has come into dutiable and marketable stage. When the single yarn gets itself twisted into a double yarn strand, it cannot be said that a marketable stage has come into existence at that stage itself without the same being subjected to beaming, warping wrapping, winding or reeling or any one or more of these processes. The double/multifold yarn can be said to have come into existence only when it is beamed, warped, wrapped, wound or reeled and it is at that stage the goods are ready for dutiability purpose. It is seen that there is no clause in the notification that it applies to small ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrived at by ld. Commissioner (Appeals), it requires to be upheld. 25. The other ground raised in the appeal is that the Bombay High Court judgment in the case of Bombay Mill Owners Association v. U.O.I. as reported in 1996 (83) E.L.T. 278 has laid down that Notification No. 35/85 is meant for independent small processors and not for large composite mills is required to be applied to the facts of the present case, is not an acceptable ground for the reason that the ld. Commissioner has already indicated in his order after due verification that this judgment is with reference to Sl. No. 1 2 of the Notification and does not have any relevance whatsoever in the instant case where exemption was claimed under Sl. No. 5. Further, Sl. No. 5 had not been mentioned in the proviso to the Notification. Therefore, Sl. No. 5 of the Notification has to be independently interpreted sans proviso, which applies to only Sl. No. 1 2. Therefore, this ground raised by the Revenue in the appeal is also required to be negatived. However, it is interesting to note from the grounds (c) of the appeal that Revenue is not seriously contesting granting the benefit of Sl. No. 5 to double yarn, but had o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the Commissioner (Appeals) in this case interpreting the term double yarn and multifold yarn in terms of HSN Explanatory Notes is not proper as HSN Explanatory Notes cannot be applied in interpreting a beneficial notification, further HSN Explanatory Notes are for the purpose of interpreting the Customs Tariff. Moreover, HSN Explanatory Notes are only having a persuasive value for interpreting Excise Tariff as well. But the same cannot be applied for interpreting a beneficial notification. The Commissioner s reliance of applicability of Bombay Mill Owners Association case (supra) is also not correct as the citation has relevance and applicability only for Sl. No. l 2 in view of the proviso in the notification and it has no applicability for interpreting Sl. No. 5 of the Notification. Therefore, while upholding the rejection of benefit of Sl. No. 1 2 of the Notification, I hold that the facts being common with regard to both the cases, the benefit of Sl. No. 5 in so far as this case is concerned is also required to be applied and granted and hence, the appellants succeed on this ground alone and not on the ground on which the Commissioner has denied the benefit of Sl. No. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... converted nylon filament yarn and cotton yarn into nylon-cotton multifolded yarn and consumed the same without payment of duty in the manufacture of man-made fabrics falling under Chapter 54. The respondents claimed exemption in terms of Serial No. 5 of The Table annexed to Notification No. 35/95-C.E. dated 16-3-95 as amended by Notification No. 84/95-C.E. dated 18-5-95. They also claimed exemption under two other Notifications viz. Notification Nos. 8/96-C.E. dated 23-7-96 and 4/97-C.E. dated 1-3-97. Such claims or exemption under the Notifications were made by them in their declarations filed under Rule 173-B of the Central Excise Rules. Department proposed to recover Central Excise duty from the respondents on the doubled/multifolded yarn cleared for captive consumption in the manufacture of fabrics. The respondents contested the proposed action of the Department by pleading, inter alia, that they were entitled to exemption from payment of duty in terms of Entry No. 5 in the Table annexed to Notification No. 35/95-C.E. The jurisdictional Assistant Commissioner, who adjudicated the dispute, confirmed the demand of duty as raised by the Department and ordered recovery thereof und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely consumed, in view of the aforesaid proviso. Against the order of adjudication, the party appealed to the Commissioner (Appeals) who rejected the appeal and upheld the order of the Assistant Commissioner by relying on the decision of the Bombay High Court in the case of Bombay Mill Owners Association v. Union of India [1996 (83) E.L.T. 278 (Bom.)]. The assessee s appeal is against this order of learned Commissioner (Appeals). 32. I have carefully perused the order recorded by learned Member (Technical) and the dissenting order recorded by learned Member (Judicial) and have noted the points of difference arising for decision by me as Third Member. 33. The respondents in the Department s appeals were admittedly engaged in the manufacture of single yarn of cotton, which they converted into doubled or multifolded yarn and used the same captively for the manufacture of cotton fabrics. Though they paid duty on the single yarn, they did not do so in respect of doubled/multifolded yarn at the time of clearing the same for captive consumption in the manufacture of fabrics. The respondents also converted nylon filament yarn and cotton yarn into nylon-cotton multifolded yarn and cleare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondents that they had availed of the benefit of exemption in terms of Sl. No. 5 of the Table annexed to the Notification. According to the decision of learned Member (Judicial), the Revenue s appeals are required to be dismissed by holding that the benefit of exemption under the Notification was available to the respondents in terms of Entry Nos. 5 and 6 of the Table annexed thereto. 34. I find that the lower appellate authority recorded a finding to the effect that the respondents claimed exemption under Sl. No. 5 of Notification 35/95-C.E. dated 16-3-95 as amended by Notification No. 84/95-C.E., dated 18-5-1995 and also under two other Notifications, viz. Notification Nos. 8/96-C.E. dated 23-7-96 and 4/97-C.E. dated 1-3-97. This finding of fact by the first appellate authority, in my view, does not require to be interfered with, at the second appellate stage, by the Tribunal. In the light of the finding of fact reached by the lower appellate authority, the issue which emerges for consideration is whether the respondents were entitled to the benefit of exemption in terms of Sl. No. 5 of the Table annexed to Notification No. 35/95-C.E. (as amended) as also the benefit of exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicial) and accordingly the respondents should be held to be eligible for the exemption under Notification No. 35/95-C.E. ( as amended) in terms of Sl. No. 5 of the Table annexed thereto. I, therefore, hold that the order of the Commissioner (Appeals) is required to be upheld and the Department s appeals against the said order have to be rejected. In this connection, I note that the necessary findings of facts have already been recorded by the lower appellate authority in relation to the respondents claim of exemption under Sl. No. 5 of the Notification and, therefore, there is no reason for remand of the matter for the purpose of verification of such claim of the party. 35. In the appeal of M/s. Davangere Cotton Mills, the only issue is whether the appellants were entitled to the benefit of exemption under Notification No. 35/95-C.E. (as amended by Notification No. 84/95-C.E.) in terms of Entry No. 1 or Entry No. 2 of the Table annexed to the Notification. The appellants have never had a case that they were entitled to exemption in terms of Entry No. 5 of the Table to the Notification. They have not raised such a plea even before the Tribunal. Therefore, in this appeal, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explained in the affidavits filed by the Additional Commissioner of Central Excise. The Court found that the initial exemption under the Notification was conferred only on doubling processes and was never intended for large composite mills referred to as integrated units who carried on both the activities, viz. production of single yarn and its doubling. Small processors were those who were not able to manufacture basic yarn which required huge capital investment and a project of high cost, the Court observed. Small processors including those who did only the process of doubling of yarn required much smaller capital investment. In view of these facts as stated by the Additional Commissioner in his affidavit in support of the Government Policy, the High Court held as under : - We find no illegality or arbitrariness in clarifying that the exemption contained in the Notification at Exh. B would not apply to clearances of yarn from an integrated unit referred to as a factory having facilities (including plant and equipment) for producing single yarn. The result of the impugned proviso would be that it would be only the processors carrying on the activity of processing alone ..... X X X X Extracts X X X X X X X X Extracts X X X X
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