Full Judgment
2. The appellants are manufacturing the yarn. Single ply yarn as it appears at the spindle stage is dutiable. In the instant case, this yarn is captively consumed by the appellants in the manufacture of double yarn, the department at the time of physical verification of the stock found that there was shortage of 68.996 MT valued at Rs. 82,00,389.00 involving duty of Rs.18,86,089.47. The department alleged that the appellants should pay duty to the above extent on the quantity of yarn found short. In reply to the SCN, the appellants submitted that in terms of Trade Notice No. 70-CE/94, dated 07.06.1994 RG-1 stage of various goods was specified; that in the instant case, the appellants had obtained permission from the Asst. Commissioner to retain the duty paid yarn; that the appellants converted single ply yarn into multi-folded/doubled yarn; that in the process shortage arose because of generation of hard waste, soft waste and sweeping waste; that the authorities below confirmed the demand and hence this appeal.
3. Arguing the case, Shri Balbir Singh, Id. Advocate submits that the department had actually not given any thought that while converting the single ply yarn into multi-folded/doubled yarn, the waste occurred. He submits that these wastes arose only after yarn is duty paid at single ply yarn stage. He submits that these wastes had nothing to do with the duty part because the duty was paid at the single ply yarn stage. He submits that the payment of duty at the single ply yarn stage had been admitted by the authorities below. He submits that since the duty was being paid at the single ply yarn stage, therefore there was no question of any payment of duty between difference, if any found in the single ply stage quantity and the multi-folded/doubled yarn quantity.
He submits that there was thus no shortage and, therefore the question of payment of any duty did not arise. He, therefore prays that the appeal may be allowed.
4. Shri R.D. Negi, ld. SDR submits that there was a shortage; that this shortage should be of single ply yarn as duty has been demanded.
However, when he was asked to point out from the order-in-original or order-in-appeal whether there is any indication that this shortage was on single ply yarn at the spindle stage, he could not point out any finding. He submits that therefore the matter may be referred back to the Commissioner (Appeals).
5. Heard the rival submissions. We note that there is no indication as to how the shortages were worked out and whether the shortage was of non duty paid single yarn or it was difference between single ply yarn and the doubled ply yarn. We note that there was a plea taken by the appellants that the difference was between the weight of single ply yarn and doubled/multi-folded yarn because of generation of waste in the process of multi-folding or doubling. We note that this is a vital issue for deciding the case and this issue has not been dealt with by the authorities below. We, therefore send the case back to the authorities below to examine the contention of the appellants in detail whether the shortage was of single ply yarn or multi-folded/doubled yarn and pass appropriate orders in accordance with law after providing the appellants an opportunity of being heard in person. The appeal is, therefore allowed by way of remand.