1985 (9) TMI 165 - AT - Central Excise

Tribunal overturns duty demand, rules burden of proof on Department. Appellants' evidence sufficient.

RAJNEESH DYEING HOUSE, LUDHIANA Versus COLLECTOR OF CENTRAL EXCISE, CHANDIGARH

RAJNEESH DYEING HOUSE, LUDHIANA Versus COLLECTOR OF CENTRAL EXCISE, CHANDIGARH - 1986 (23) E.L.T. 123 (Tribunal) Issues Involved:1. Rate of duty payable on texturised yarn processed from grey yarn.2. Proof of duty payment on base yarn.3. Applicability of Rule 9(2) of the Central Excise Rules, 1944.4. Validity of the demand for differential duty.Detailed Analysis:1. Rate of Duty Payable on Texturised Yarn:The central issue in this appeal is the rate of duty payable by the appellants, who are engaged in dyeing acrylic yarn, which they clear as texturised yarn under T.I. 18(ii) of the Central Excise Tariff, read with Notification No. 125/75-C.E., dated 12-5-1975. The duty payable on texturised yarn was 'The duty for the time being leviable on the base yarn, if not already paid, plus Rs. 20/- per kg.' Notification No. 125/75 reduced this additional rate to Rs. 10/- per kg.2. Proof of Duty Payment on Base Yarn:The appellants argued that they operated as job workers under a Central Excise licence and cleared the yarn on proper assessment, maintaining all statutory records. They contended that the duty on the base yarn had been paid by the spinners or customers, submitting challans and gate passes for verification. The Assistant Collector, however, confirmed the demand for differential duty on the grounds that the appellants failed to prove that duty on the base yarn had been paid, ignoring the evidence provided.The appellants relied on several judgments, including 'Sulekh Ram and Sons' v. Union of India and Others, which established that duty liability was on the manufacturers of goods, and there is a presumption of discharge of duty liability at the stage of clearance of base yarn. The Tribunal concurred with this view, emphasizing that the burden of proof to show that duty had not been paid on the base yarn lay with the Department.3. Applicability of Rule 9(2) of the Central Excise Rules, 1944:The appellants argued that the authorities erred in applying Rule 9(2), which operates only in cases of clandestine or surreptitious removals. The Tribunal found this issue to be academic, as the demand notice was issued within the permissible time frame under Rule 10.4. Validity of the Demand for Differential Duty:The Tribunal noted that the appellants had furnished sufficient documentary evidence to show that duty had been paid on the base yarn. The Department failed to verify or falsify this assertion. The Tribunal held that the demand for differential duty was unjustified, as the appellants were not required to prove that duty had been paid on the base yarn. The Tribunal referenced its earlier decisions in similar cases, which supported the appellants' position.Conclusion:The Tribunal allowed the appeal, setting aside the orders of the lower authorities and the demand for differential duty. The Tribunal emphasized that the Department had proceeded on a wrong assumption regarding the duty payment on the base yarn and that the appellants had adequately discharged their burden of proof.