TaxTMI 
TaxTMI 
1989 (9) TMI 100
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....d to as `the Act'). "Yarn, all sorts, not elsewhere specified...." became liable to duty under Item 18-E of the First Schedule under the Finance Act, 1972 w.e.f. 17-3-1972. The consequence was that, from 17-3-1972, the yarn which was being produced by the appellants became liable to duty under Item 18-E while the fabric manufactured by them was dutiable under Item 19. 3. The Central Government decided to give two categories of assessees the benefit of the provisions of Rules 96 V & W of the Central Excise Rules : (1) assessees manufacturing woollen yarn; and (ii) assessees manufacturing cotton yarn or yarn falling under Item 18-E and using the same wholly or partly, in the manufacture of fabrics in their own factory. These rules appeared in Chapter V of the Rules as Section E.VI, headed "Cotton yarn, woollen yarn, yarn falling under Tariff Item 18-E - Special Procedure". This Section in the rules was inserted by Notification No. 110/61, dated 20-4-1961 and omitted by Notification No. 146/77, dated 18-6-1977. They read thus : "96-V. Application to avail of special procedure - (1) Where a manufacturer who manufactures cotton yarn, yarn falling under Item 18-E of the First Sc....
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.... alteration in the rates of duty and/or in the limit of exemption, the sum payable shall be re-calculated on the basis of the revised rates and/or exemption limit from the date of alteration and liability for duty leviable on the quantity of cotton yarn or yarn falling under Item 18-E of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) used in the manufacture of cotton fabrics or woollen yarn produced shall not be discharged unless differential duty is paid (a) in the case of such cotton yarn, or yarn falling under Item 18-E of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) as on the date of clearance of the aforesaid cotton fabrics, and (b) in the case of woollen yarn, as on the date of clearance of such woollen yarn, from the factory of the manufacturer, should, however, the amount of duty so re-calculated be less than the sum paid, the balance shall be refunded to the manufacturer. (2) That rate specified under sub-rule (1) shall be separately and distinctly notified, and shall be separately and distinctly applied, in respect of (i) cotton yarn and (ii) woollen yarn. (3) The sum pay....
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....le 96-W aforesaid, the procedure set out in that rule in this behalf shall uniformly apply to all the yarn of the description specified in the above Table and used by him in the production of cotton fabrics in his factory. Explanation.- For the purpose of this notification- (i) "base fabrics" shall have the same meaning as assigned to it in Tariff Item No. 19 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1994) (ii) the average count of yarn in a fabrics shall be deemed to be the count of all yarn contained in such fabric. 4. Rules 96 V & W, it will be noticed, deal with two items : cotton yarn or yarn falling under Item 18-E of the First Schedule and woollen yarn. Normally, under the Schedule to the Act, woollen yarn was being charged to excise duty on an ad valorem basis while cotton and other yarn was being assessed on weight basis. The rules cited above and the notification referred to, however, provided an alternative, on the application of the assessee. On a notification being issued and the assesse's option being exercised, duty on woollen yarn became payable on the basis of weight at the rates prevalent at the time of clearance of the y....
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.... the area of fabric manufactured therefrom; (b) the postponement of the collection of the duty till the point of clearance of the fabrics; and (c) the levy of the duty at rates prevalent not on the date of production of the yarn but on the date of clearance of the fabric. 6. If the notification of 17-3-1972 had continued in force, there would have been no difficult in its application. However, on 24-7-1972, the Government issued Notification No. 169 of 1972, the result of which was that the special procedure referred to above was made inapplicable to the type of yarn manufactured, used for weaving and cleared by the appellants. The short question in these appeals is as to the effect of this omission in respect of yarn produced after 17-3-1972 and cleared for captive consumption before 24-7-1972 but lying in various departments at various stages of manufacture or in the form of cotton fabrics not yet cleared as on 24-7-1972. The department has taken the view that in respect of the yarn manufactured between 17-3-1972 and 23-7-1972 the assessee is liable to pay the normal duty payable on yarn under Item 18-E so long as the fabrics manufactured out of such yarn remained unclea....
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....provide only for its postponed collection. If we are right on this, the duty on such yarn - produced between 17-3-1972 and 24-7-1972 - has to be determined in accordance with the rates specified in the notification, though such rates may have to be calculated in terms of the area of the fabric cleared on or after 24-7-1972. The duty cannot be determined at the rates specified for yarn under Item 18-E as applicable on the dates of clearance of the fabric manufactured by using the yarn. To hold otherwise would really mean holding that the incidence of duty on the yarn under the notification arises only on the date of clearance of the manufactured fabric. This, in our view, is not the effect of the notification. 9. The proviso to Rule 96-W does not help the revenue. It only contemplates cases where there is a change in the rates prescribed under the notification between the date of production of the yarn and the date of clearance of the fabric. In such a case, an assessee may well contend, but for the proviso, that the duty having attached itself on the date of production of the yarn, it has to be calculated only at the rates then prevalent and should not be re-calculated at the ra....