Full Judgment
4.1.1995.
[2] Demand of Rs. 28,96,358/- has been confirmed as a result of classification of yarn manufactured and cleared during the period March 2001 to February 2002 under Central Excise Tariff subheading 5402.6 (Nylon Yarn) and 5402.62 (Polyester Yarn) as against the manufacturers claim for classification of the covered yarn under Central Excise Tariff sub-heading 5606.00.
2. We have heard both sides. The issue as to the correct method of computation of duty in terms of notification No. 2/95 namely as to whether duty was payable on the basis of amount equal to 50% each of the duties of customs as contended by the applicants or on the basis of 50% of the aggregate duties of customs has held by the Commissioner, is an issue which has been referred to the Larger Bench by Order No.C-II/3114/WZB/2003 dated 3.12.03 in the case of Indoworth India Ltd. v.Commissioner of Central Excise, Nagpur, after noting the divergent views in the case of Futura Polymers v. CCE [2003 (54) RLT 405] and Uniworth Textiles Ltd. v. CCE (unreported decision in Appeal No. E/762 to 769/02), as two contrary view on this issue have been expressed by the Tribunal, a strong prima facie case for wavier of predeposit has been made out. We, therefore, dispense with the predeposit of duty of Rs. 15,93,013/- and stay recovery thereof pending the appeals.
3. As regards the demand on the second count, applicant's submission is that even if the yarn manufactured by them falls for classification under Chapter heading 5402, the benefit of exemption in terms of Notification No. 3/2001 which is available to Air mingled Yarn is admissible, in view of the finding that they were using Inter-mingling Machinery and that the Polyester/Nylon yarn was attached to Lycra/Spandex Yarn due to pressurized air by the technique of inter-mingling, and that they had paid the appropriate duty of excise on the base yarn (which at the relevant time was interpreted as including even Nil rate of duty), thus fulfilling the condition of the exemption notification. We find prima facie substance in this plea as the notification covers inter-alia air-mingled yarn falling under Sub-heading 5402.61/5402.62, subject to the condition of manufacture out of base yarn falling under certain headings (this conditions stands fulfilled by the applicants) and subject to the condition of payment of appropriate duty of excise on the base yarn, and until 2002, the CBE&C Circular clarifying that the expression "appropriate duty of excise" would also include "nil" duty was operative and the Apex Court in the case of Collector of Central Excise, Vadodara v. Dhiren Chemical Industries [2002 (143) E.L.T. 19 (S.C.)] has held that regardless of the fact that the Supreme Court in 2002 (139) ELT 3 (S.C.) in the case of Dhiren Chemical Industries has held that the expression "appropriate amount of duty" does not include "Nil" duty, since circulars had been issued by the CBE&C placing at different interpretation, that interpretation would be binding upon the Revenue. We, therefore, waive the predeposit of duty of Rs. 28,96,358/- and stay recovery thereof pending these appeals. Predeposit of penalties imposed upon the company and its Director also stands waived and recovery thereof stayed pending the appeals.