GEM SPINNERS (INDIA) LTD. Vs. CCE

JUDGEMENT

(1.) ONE of these appeals is by the assessee and the other by the Revenue. The assessee, during the material period, was engaged in the manufacture of cotton yarn, as a 100% Export -Oriented Unit (EoU). The department found that they had cleared cotton waste to domestic tariff area (DTA) without payment of duty during the period December 1994 to July 1995. They issued a show -cause notice dated 2.3.99 demanding duty of over Rs. 9.9 lakhs from the assessee and proposing penalties under various provisions of the Central Excise Rules, 1944. Interest on duty was also demanded under Section 11AB and penalty was also proposed under Section 11AC of the Central Excise Act. The demands and proposals were contested. In adjudication, the original authority confirmed the above demand of duty against the assessee by invoking the extended period of limitation and imposed on them a penalty of Rs. 1 lakh. In the assessee's appeal against the decision of the original authority, ld. Commissioner (Appeals) set aside the demand of duty for the period prior to 16.3.95 on the ground that cotton waste was not excisable during such period. However, the appellate authority affirmed the demand of duty for the period from 16.3.95 in view of the alignment of the Central Excise Tariff with the Customs Tariff from the said date under the 1995 -Budget. As to whether carding and combing operations amounted to "manufacture", ld. Commissioner observed to the effect that the said issue was irrelevant and that the issue related to dutiability of soft waste after 16.3.95 in view of the alignment of the two tariffs. However, the penalty imposed by the lower authority was set aside.

(2.) THE present appeal of the assessee is against the demand of duty for the period 16.3.95 to 31.7.95. The ground raised by the appellant is that the process in which cotton waste was generated did not amount to ''manufacture" within the meaning of this expression defined under Section 2(f) of the Central Excise Act. The Revenue's appeal is against that part of the impugned order, wherein the demand of duty for the period prior to 16.3.95 and also penalty were vacated. In this appeal, the main ground raised by the Revenue is that though, prior to 16.3.95, there was no specific entry for cotton waste in the First Schedule to the Central Excise Tariff Act, the commodity was specifically covered by an entry (SH 5202.99 - 'Other') and, by virtue of the proviso to Section 3(1) of the Central Excise Act, which contained specific reference to Section 12 of the Customs Act in the context of quantification of Central Excise duty, duty of excise was leviable on the commodity.

(3.) LD . SDR has reiterated the grounds of the Revenue's appeal and also has opposed the assessee's appeal.