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of <h1>Court overturns duty imposition on intermingled yarn; penalties and confiscation reversed. Clarification on air-mingling vs. air-texturising.</h1> The appeals were allowed, and the impugned order was set aside. The court determined that the assessees were not liable to pay duty on intermingled yarn. ... Demand - Limitation Issues:1. Liability to pay duty on intermingled yarn.2. Confiscation of plant and machinery.3. Imposition of penalties.4. Interpretation of Tariff Note 3 to Chapter 54.5. Application of the extended period under Section 11A(1).6. Retrospective application of the amendment to Tariff Note 3.7. Distinction between air-mingling and air-texturising.8. Department's belief regarding air-texturing as a manufacturing process.Analysis:1. The Commissioner held that the two assessees were liable to pay duty on intermingled yarn and confirmed the duty demanded. The assessees appealed against this decision, challenging the duty imposition.2. Additionally, the Commissioner confiscated the plant and machinery of the assessees and imposed penalties on them and their common director. The appeal also contested these actions.3. The Commissioner acknowledged that the process carried out by the assessees involved intermingling of yarn, specifically mentioning the manufacturing of siya silk yarn through intermingling. The Commissioner invoked Tariff Note 3 to Chapter 54 to support the duty imposition, considering the process as a form of manufacture.4. The distinction between intermingling and texturising of yarn using an air-jet was maintained throughout the orders. The Tariff recognized air-mingling as a separate process from texturising, and the amendment to Note 3 in 1999 clarified this distinction.5. The notices for duty and penalties were issued for clearances made up to December 1996, invoking the extended period under Section 11A(1). However, the Commissioner did not explicitly state that the process amounted to air-texturising, affecting the availability of the extended period.6. The retrospective application of the 1999 amendment to Note 3 was considered clarificatory in nature. The belief that air-texturing was not considered a manufacturing process before the amendment was highlighted, impacting the limitation period for duty imposition.7. The judgment emphasized the difference between air-mingling and air-texturising, with the Tariff recognizing them as distinct processes. The amendment in 1999 clarified this distinction, indicating that prior to the amendment, air-mingling was not universally considered a manufacturing process.8. The department's belief regarding air-texturing as a manufacturing process was crucial in determining the availability of the extended period for duty imposition. The department's stance before the 1999 amendment indicated that the extended period was not applicable, leading to the setting aside of duty demands, penalties, and confiscation.In conclusion, the appeals were allowed, and the impugned order was set aside based on the detailed analysis of the issues related to duty imposition, penalties, interpretation of Tariff Note 3, and the application of the extended period under Section 11A(1) in the context of air-mingling and air-texturising processes.
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