1981 (2) TMI 88 - CGOVT - Central Excise

Summary

Issues:
1. Interpretation of Central Excise Rules regarding the assessment of duty on cotton yarn utilized in the manufacture of fabrics.
2. Applicability of recent court judgments on excisable goods produced and used within a factory.
3. Consideration of duty on yarn as part of the assessable value of fabrics.
4. Validity of demands for differential duty.
5. Time-barred nature of the demands confirmed under the repealed Rule 10 of the Central Excise Rules.

Detailed Analysis:
1. The petitioners, a composite mill manufacturing cotton yarn and fabrics, availed the facility of certain Central Excise Rules for duty payment on yarn used in fabric manufacture. The lower authorities deemed duty on yarn as part of fabric assessable value, confirming demands for differential duty. The petitioners argued that recent court judgments exempt excisable goods produced and used within a factory from duty. However, the Government found that the continuous manufacturing process exemption did not apply as yarn was not directly used in weaving, making it dutiable.

2. The petitioners contended that duty on yarn should not be part of fabric value due to the compounded levy procedure. They referenced a Gujarat High Court judgment on a similar issue but the Government differentiated the cases, stating that the duty liability arises when yarn is manufactured, regardless of when duty is paid. The absence of a specific notification exempting fabrics from duty on yarn further weakened the petitioners' argument.

3. The petitioners highlighted demands on other mills being exempted and subsequent notifications. However, the Government clarified that notifications cannot have a retrospective effect, thus not aiding the petitioners' case.

4. Regarding the time-barred demands confirmed under the repealed Rule 10, the petitioners argued that the amended rule lacked a saving clause. The Government cited legal principles and a Rajasthan High Court judgment to support the view that the old rule's provisions applied to past cases, rejecting the time-barred argument.

5. Ultimately, the Government upheld the orders, rejecting the revision applications based on the assessment of duty on yarn, fabric value calculation, lack of retrospective effect of notifications, and the application of the old rule to time-barred demands. The Editor's comments highlighted relevant Supreme Court and High Court decisions, indicating the incorrectness of the Revisionary Authority's decision in light of the law declared by the Supreme Court.