1999 (8) TMI 155 - AT - Central Excise

Waste cotton yarn duty liability arises post-manufacturing completion. Revenue appeal allowed.

COLLECTOR OF C. EX., BOMBAY-I Versus MODERN MILLS

COLLECTOR OF C. EX., BOMBAY-I Versus MODERN MILLS - 1999 (113) E.L.T. 822 (Tribunal) Issues:1. Duty liability on cotton yarn used in the manufacture of cotton fabrics.Analysis:1. The appeal concerns the duty liability on cotton yarn used in the same factory for the production of cotton fabrics. The central issue revolves around whether a reduction in duty is permissible for the waste arising after the yarn is used in weaving cotton fabrics. The Asstt. Collector of Central Excise held that duty liability is fixed at the spindle stage before weaving, and Rule 49A postpones duty collection without providing an exemption from the already leviable duty. The Revenue argued that duty on yarn is payable at the spindle stage, and any waste generated after this stage is not covered by the exemption under Notification No. 95/61-C.E.2. During the hearing, the JDR for the Revenue contended that duty on yarn is leviable upon manufacture, and subsequent use in fabric production is part of the duty on fabrics. Referring to a Tribunal decision, it was argued that waste occurring during weaving is not eligible for exemption. On the other hand, the Advocate for the Respondents relied on Notification No. 95/61-C.E., stating that waste cotton yarn is exempted regardless of the stage at which it arises, citing a Supreme Court decision for interpretation principles.3. The Tribunal analyzed Notification No. 95/61-C.E., which exempts various waste cotton products from excise duty. The definition of 'waste cotton yarn' was provided, and it was emphasized that duty on cotton yarn becomes payable upon removal from the manufacturing place for further processing. The Tribunal referred to a Supreme Court case to highlight that once yarn is manufactured, duty liability is crystallized, and subsequent exemptions do not apply.4. The Tribunal further discussed previous judgments, including those by the Supreme Court and High Courts, emphasizing that duty liability arises upon completion of yarn manufacturing, even if payment is deferred. The introduction of Rule 49A aimed to postpone duty collection but did not alter the duty liability on the yarn. The Tribunal clarified that waste yarn after spinning and during weaving is not exempt under relevant notifications.5. Finally, the Tribunal concluded that waste cotton yarn occurring at any manufacturing stage is not covered by Notification No. 95/61-C.E. The Order-in-Appeal was set aside, and the original order by the Asstt. Collector of Central Excise was restored. The appeal by the Revenue was allowed, and the decision was made accordingly.