2005 (9) TMI 395 - AT - Central Excise

Summary

Issues:
Short levy of duty on base yarn used in the manufacture of texturised yarn, interpretation of duty calculation, contention of the appellant regarding duty payment, sustainability of duty demand, limitation period for duty demand, applicability of previous tribunal decision, duty payable on waste yarn.

Detailed Analysis:

1. Short Levy of Duty on Base Yarn:
The appellant, a manufacturer of texturised synthetic yarn, faced a duty demand alleging a short levy of duty on the base yarn used in the manufacturing process. The duty computation was based on an assumed loss of 6.5% of base yarn during texturising, leading to a significant duty demand.

2. Interpretation of Duty Calculation:
The duty calculation statement assumed that 93.5 kg of textured yarn would be produced from 100 kgs of base yarn, with a note clarifying the basis of the demand as an assumed loss of base yarn at 6.5%. This calculation formed the basis of the duty demand issued to the appellant.

3. Contention of the Appellant Regarding Duty Payment:
The appellant contended that the duty paid on the textured yarn was based on the duty leviable on the base yarn at Rs. 20 per kg, and that full duty was discharged at the time of removal of the textured yarn. Additionally, the appellant argued that waste yarn remained exempt under a specific notification, thus challenging the duty demand.

4. Sustainability of Duty Demand:
The appellant raised objections to the sustainability of the duty demand, arguing that it was made without a factual basis and solely on an assumption unsupported by practical experience or technical literature. The appellant emphasized that a demand based on such an assumption cannot be upheld.

5. Limitation Period for Duty Demand:
The appellant also contended that the duty demand was barred by limitation, as it was made beyond the normal period without any evidence of suppression of material facts to evade duty. The absence of such evidence rendered the demand unsustainable beyond the prescribed limitation period.

6. Applicability of Previous Tribunal Decision:
During the hearing, the appellant cited a previous tribunal decision where a similar case was decided in favor of the assessee due to the exemption of waste yarn from duty payment. The appellant argued that their case was analogous to the previous decision and should be allowed accordingly.

7. Duty Payable on Waste Yarn:
The Tribunal analyzed the issue of duty payable on waste yarn, clarifying that waste yarn was exempt from duty payment during the relevant period. Since the case was treated as one of waste of base yarn, similar to the previous decision, the duty demand was deemed unsustainable. Consequently, the appeals were allowed, and the impugned order was set aside with relief granted to the appellant.