COLLECTOR OF C. EX. Vs. MODERN MILLS

JUDGEMENT

(1.) IN this appeal filed by the Revenue, the matter relates to the duty liability on cotton yarn manufactured and used in the same factory for the manufacture of cotton fabrics. Under Rule 49A of the Central Excise Rules, 1944 (hereinafter referred to as the 'Rules'), the Central Excise duty leviable 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 is fixed at this stage prior to its use in weaving. Rule 49A postpones the collection of central excise duty and it does not provide for any exemption from the duty already leviable. He held that the argument that yarn waste arising at the time of weaving is exempted under Notification No. 95/61 -C.E., dated 1 -4 -1961 could not be accepted. He confirmed the demand in respect of cotton yarn waste arising in the Weaving Department of the assessee - M/s. Modern Mills Ltd. out of cotton yarn issued for weaving and cleared by them without payment of duty. On appeal by the assessee, the Collector of Central Excise (Appeals) in his Order -in -Appeal, dated 14 -10 -1992 observed that Notification No. 95/61 -C.E., dated 1 -4 -1961 extended exemption to waste cotton yarn and that this exemption will be available even to the waste cotton yarn occuring at the weaving stage. In appeal, the Revenue had submitted that the yarn is fully manufactured at spindle stage and it is accounted for at spindle stage. Yarn becomes dutiable at that spindle stage. Under Rule 49A although payment of duty on yarn is postponed and was to be collected along with the fabric stage duty, weight of yarn leviable to duty remained the weight of yarn at the spindle stage. The exemption under Notification No. 95/61 -C.E. in favour of yarn waste could only relate to the stage prior to or at the stage of duty liability on the yarn. It has been pleaded by the Revenue in their appeal that the duty on yarn is liable to be paid at the 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 passed by the Asstt. Collector of Central Excise. He relied upon the Tribunal's decision in the case of Commissioner of Central Excise, Jaipur v. Jagajit Cotton Textiles Mills Ltd. -1997 (94) E.L.T. 339 (Tribunal) wherein it had been held that the waste occurring during the course of weaving was not eligible for exemption but the waste occurring at stage precedent to weaving was eligible for exemption.

(3.) SHRI C.S. Lodha, Advocate referred to the provisions of Notification No. 95/61 -C.E., dated 1 -4 -1961 under which waste cotton yarn had been exempted from duty and submitted that the exemption notification did not refer to any tariff heading in the Tariff. The notification had to be interpreted on its own merits and nothing could be added to the Notification and nothing could be substracted from it and no item number of the Tariff was mentioned in the Notification. The waste arising at the stage of weaving will also be eligible for the benefit of the said exemption Notification. He also submitted that if there are two notifications equally applicable then the one which is beneficial to the assessee had to be applied. He relied upon the Supreme Court's decision in the . case of U.O.I. v. Tata Iron and Steel Co. Ltd., Jamshedpur - 1977 (1) E.L.T. (J 61) wherein it had been held that where the duty paid pig iron is mixed with non -duty pig iron then the set off cannot be refused on the ground that non -duty paid material has also been used.