1988 (11) TMI 217 - AT - Central Excise

Texturised yarn from partially oriented yarn subject to excise duty; Tribunal rejects altered denierage argument.

The Tribunal upheld the Order-in-Appeal in favor of the respondents, ruling that the textured yarn produced from partially oriented yarn (POY) through ... Classification Issues:Interpretation of Central Excise Notification No. 55/78 regarding excise duty on textured yarn produced from partially oriented yarn (POY) subjected to draw-texturising process.Detailed Analysis:The case involved two appeals challenging an Order-in-Appeal passed by the Collector of Central Excise, Bombay, regarding the eligibility of a concessional excise duty rate for textured yarn produced from POY through draw-texturising. The excise authorities contended that the concessional rate did not apply as the POY was converted into fully oriented yarn (FOY) before texturising, leading to a demand for short-paid duty. The Assistant Collector upheld the demands citing suppression of information, but the Collector (Appeals) ruled in favor of the appellants, considering the texturised yarn as duty paid base yarn under Notification No. 55/78.The appellants argued that the POY used for texturising was not base yarn as per the notification, emphasizing the distinction between POY and FOY in trade understanding. They claimed that the POY, even after denierage reduction in the draw-texturising process, remained base yarn eligible for the concessional duty rate. The respondents countered, asserting that the extended period of limitation was wrongly invoked, and the demand could only be enforced for six months preceding the show cause notices.The Tribunal analyzed the manufacturing process of POY and texturised yarn, confirming that POY required simultaneous drawing and texturising for conversion, unlike FOY which could be directly texturised without denierage reduction. The notification exempted textured yarn produced from base yarn, defined as yarn from which textured yarn is made, and as the POY was duty-paid filament yarn, the textured yarn was liable for duty at Rs. 5/kg.The Tribunal rejected the department's argument that POY, post denierage reduction, should be charged based on altered denierage, as FOY did not exist independently and was produced concurrently with texturising in the draw-texturising process. Consequently, the Tribunal upheld the impugned order, dismissing the appeals and affirming the liability for basic excise duty at Rs. 5/kg on the textured yarn cleared by the respondents.In conclusion, the Tribunal did not delve into cited decisions or other contentions, as the interpretation of the Central Excise Notification No. 55/78 was pivotal in determining the excise duty liability on the textured yarn produced from POY through draw-texturising.