TMI Blog2005 (4) TMI 414X X X X Extracts X X X X X X X X Extracts X X X X ..... claiming exemption under Notification No. 8/96-C.E. in respect of their product, which was accepted for provisional assessment under Rule 9B till the outcome of test results on the denierage and tenacity of the yarn. Samples were drawn on 7-6-96, 26-7-96, 29-8-96 1-10-96 and 31-12-96 for determination of denierage. The Chemical Examiner found the denierage of the yarn samples to be above 224, which exceeded even the higher limit of 210 + 4% prescribed under the Exemption Notification. The assessee contested the test results and sought re-test of the samples by the Chief Chemist, CRCL, New Delhi. The Chief Chemist s report confirmed the Chemical Examiner s test results. Subsequently, as suggested by the Chief Chemist, the samples were got tested at the National Test House, Madras for tenacity of yarn. The National Test House reported tenacity as below the minimum [52.92 cN/Tex] required for 210 denier yarn under IS : 4401-1981. The NTH results as to denierage of yarn further confirmed the results reported by the Chemical Examiner and the Chief Chemist. On the basis of the test results, the original authority held that the benefit of exemption under Notification No. 8/96-C.E. was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufactured and cleared during the said period. 4.Ld. Counsel also submitted that the quantity of the yarn removed for export by the appellants (physical exports) as also the quantity of yarn cleared by the appellants to their job workers for conversion into fish net twine for export (deemed exports) should have been excluded from the levy. Referring to the finding of the original authority that no quantity of twine which was claimed to have been manufactured out of yarn cleared by the appellants during the period of dispute and to have been exported, was correlated with any quantity of yarn cleared by the appellants during the said period, ld. Counsel argued that the authority should have followed the First In First Out (FIFO) method, in which event it would have been found that 2,81,336.215 K.grms. of yarn contained in twine exported were out of the clearances of yarn effected after 23-7-1996 from the appellants factory. This quantity of yarn ought to have been excluded from levy of duty. This argument of ld. Counsel was based on an equitable principle like the one followed by the Hon ble Supreme Court in the case of TELCO v. Municipal Commissioner, Thane reported in 1993 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision in the case of Srichakra Tyres v. CCE [1999 (108) E.L.T. 361 (LB)] affirmed by the Supreme Court in CCE v. Maruti Udyog Ltd. [2002 (141) E.L.T. 3 (S.C.)]. Yet another grievance raised by the Counsel was that Modvat credit of the duty paid on Chips (input), amounting to over Rs. 33 lakhs, was not allowed by the authorities while quantifying the demand of duty. Counsel also referred to another show cause notice dated 29-1-1997 which demanded duty of Rs. 33,75,286/- on the opening stock of yarn as on 23-7-96 on the ground that this quantity of yarn was not eligible for exemption. It was pointed that this quantity of yarn was also included for the demand of duty presently under challenge, which was referred to by Counsel as duplication. 5.Ld. SDR submitted that it was not open to the appellants to contest any of the chemical test reports inasmuch as their Counsel had abandoned this contest before the lower appellate authority. Anything stated by the Chemical Examiner in her cross-examination was not consequential inasmuch as her test reports were accepted. Ld. SDR claimed judicial support when she argued that demand of duty based on a test report need not be restricted to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to time during the period of dispute did not satisfy the requirement for the benefit of the exemption Notification. 7.The question now is whether, on the basis of test report on a sample drawn from the production stock of a particular day, duty could be demanded from that date to the date of taking of the next sample. A similar question was considered by the Hon ble High Court of Madras in the case of Ramalinga Choodambikai Mills Ltd. (supra) and it was held that, on the basis of the result of test on a sample of yarn drawn on a particular date, duty could be demanded upto the date of taking of the next sample. The relevant paragraph of the High Court s order is reproduced below :- The second ground of attack is that the result 7. of the test reports can be applied only to the quantity of yarn manufactured on the date when the sample was taken and not for the entire period between 14-9-1966 to 20-10-1966. The contention of the petitioner is that it cannot be assumed that the count of yarn manufactured by the petitioner on subsequent days was the same as one found on 14-9-1966 and that the test report based on a sample of 840 yars cannot be taken to represent the entire 3863 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... every sampling done by Department. On these facts, the above ruling of the High Court is squarely applicable to the present case. We find that the above decision of the High Court was taken note of by the Hon ble Supreme Court [2001 (130) E.L.T. A176 (S.C.)] while dealing with the SLP filed by the department against the High Court s judgment in Cambodia Mills Ltd. (supra). The Hon ble High Court held to the same effect in the case of Bojaraj Textile Mills Ltd. (supra). In this case, a sample of cotton yarn was drawn on 30-12-1974 and the next sample was drawn on 22-4-1975. Duty was demanded for the period from 28-12-1974 to 21-4-1975. This demand was sustained by the High Court after rejecting the assessee s contention that the Chemical Examiner s report on the sample drawn on 30-12-1974 could not be any basis for assessment of yarn manufactured after that date. In the case of Laxmi Vishnu Textiles Mills (supra), the Tribunal followed the High Court s judgments in Ramalinga Choodambikai Mills (supra) and Bojaraj Textiles Mills (supra) and held that demand of duty on the basis of test report need not be restricted to the batch from which sample was drawn. Ld. Advocate has relied on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner s order was allowed by remand for de novo adjudication. When the order-in-original in the instant case was passed, the above issue was pending before the Commissioner for de novo adjudication. Neither side has told us as to the Commissioner s decision if any. If his decision is against the assessee, their protest will get dislodged and the payment of duty on chips will be reckoned to be in order, in which event credit of such duty will be available to the party vis-a-vis the demand of duty on yarn. 9.In the result, we allow this appeal only to the extent of (a) allowing abatement of duty from sale price in terms of Section 4(4)(d)(ii) of the Central Excise Act and (b) allowing Modvat credit of the duty paid on chips during June-October, 1996 subject to the appellants protest (relating to the payment of duty on chips) being vacated in accordance with law. The impugned order is set aside to this extent only. It is upheld in all other respects. The original authority shall accordingly requantify the duty to be paid by the assessee. It shall, while doing so, verify the appellants complaint of duplication of demand vide para (4) of this order. (Order pronounced in open Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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