Full Judgment
2. The respondents manufacture cotton yarn. Under Notification No.95/61-C.E. yarn of low count spun from cotton waste is exempt from duty. On receipt of information that cotton other than cotton waste is used by the respondents in the manufacture of yarn excise control was imposed on the respondents' units. The test check was continued. From 1980 to the first half of 1981 the test check indicated that the respondents were using cotton waste only. Therefore, they were advised to file price list claiming exemption under Notification No. 95/61 -C.E. Accordingly they filed a price list No. 98 of 1981 on 12th June, 1981. The price list was approved by the department. Thereafter on 27th November, 1981 and 15th January, 1982 the test check results have indicated that the respondents were using virgin cotton in the manufacture of yarn. Therefore, a show cause notice was issued on 23rd January, 1982 proposing to withdraw the benefit of exemption Notification No. 95/61-C.E. On receipt of reply the Asstt. Collector withdrew the benefit of exemption notification granted while approving the price list by his order dated 6th May, 1982 against which an appeal was filed (Appeal No. 1546/82) before the Collector (Appeals). The Collector (Appeals) allowed the appeal against which the department has come up in appeal before us.
3. The respondents also filed claims for refund of duty paid from 1st May, 1980 to 16th July, 1981, on the ground that the approval of price list was effective from 12th June, 1981 and that there was no price list prior to this date giving exemption under Notification No. 95/61 -C.E. The refund claim was rejected by the Asstt. Collector in view of his order which is under appeal No. 1566/82 before the Collector (Appeals) withdrawing the benefit of exemption notification. The respondents filed an appeal before the Collector (appeal No. 1198/82) which was allowed by the Collector against which the department has come up in appeal before us.
4. The Collector disposed of two appeals i.e. appeal No. 1566/82 (appeal arising out of the order withdrawing the benefit of exemption Notification No. 95/61) and the appeal No. 1198/82 (rejecting the claim for refund of duty for the period from 1st May, 1980 to 16th July, 1981), by a comman order.
5. As regards the appeal relating to the refund is concerned the period involved is from 1st May, 1980 to 16th July, 1.981. In the grounds of appeal it is stated as follows : "In 1980 the results of these test checks indicated that the respondents were restricting use of raw materials almost exclusively to waste obtained from spinning operations during first half of 1981. They were, therefore, advised to file a classification list claiming exemption under Notification No. 95/61-C.E. They filed classification list No. 98 on 12th June, 1981 which was duly approved and they were allowed to avail of the exemption." 6. In view of the categorical averment that the test checks indicated that during the relevant period for which the refunds are claimed the appellants have used cotton waste, there is no reason why the refund claim should not be allowed. In other words, there is no dispute that the respondents were manufacturing yarn by using the cotton waste, during the relevant period for which the refund was claimed and it is only on 27th November, 1981 it was detected that the respondents were using virgin cotton in the manufacture of yarn. Therefore, Ihcy are entitled to the benefit of exemption Notification No. 95/61 for the period from 1st May, 1981 to 16th July, 1981. We have also perused test check reports commencing from 10th Sept., 1980 to 15th May, 1981 which have indicated that the respondents are manufacturing yarn by using cotton waste. No doubt these results relate to 1 Oth Sept., 1980 to 15th May, 1981, however, in view of the categorical averment in the grounds of appeal, we allow the refund claim for the period commencing from 1st May, 1981 to 16th July, 1981. The appeal is, therefore, dismissed.
7. As regards the approval of classification list allowing the benefit of exemption Notification No. 95/61 the main ground on which the benefit was withdrawn by the Asstt. Collector was that the test results indicated that the respondents were using virgin cotton in the manufacture of yarn.
1981,15-1-1982,20-2-1982 and 8-3-1982. According to the department the test results of the samples drawn on 20th February, 1982 and 8th March, 1982 contained waste cotton whereas the test results of the samples drawn on 27-11-1981 and 15-1-1982, 23-1-1982 and 5-2-1982 contained virgin cotton. The test results of the samples are as follows :- The sample of cotton drawn on 27-11-1981 discloses package No. 1 & 3 100% cotton waste and package 2 discloses the presence of virgin cotton, yellow picking spinning value 10s and below 10s.
The sample drawn on 15-1-1982 discloses package No. 2 & 3 virgin cotton, spinning value above 10s.
The sample drawn on 23-1-1982 discloses package No. 1 contains 100% virgin cotton, yellow picking spinning value 2s, package No. 2 contains yellow picking spinning value 2s, package No. 3 100% virgin cotton, Bangala Deshi, spinning value below 10s.
The sample drawn on 5-2-1982 discloses that it contains 100% virgin cotton spinning value below 10s.
9. In other words the test reports disclose that the respondents were manufacturing yarn not only by using virgin cotton but also cotton waste and yellow picking. By an order this Tribunal, in CCE v. Katare Cotton Waste Spg. Mills and Ors. [Order No. 113 to 115/87-B reported in 1987 (31) ELT 733 (Tri)] held that yellow picking is a cotton waste.
From the reports referred above the virgin cotton is used in minor quantity whereas cotton waste was used in major quantity of the yarn produced.
10. The question, therefore, is whether the respondents are entitled for the benefit of exemption notification as the yarn was manufactured by using cotton waste and a smaller percentage by using virgin cotton.
In this context we may refer to the language used in the notification : "Exemption to waste yarn, twist and thread or yarn spun from cotton waste :- In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts from whole of the duty of excise leviable thereon under Section 3 of the Central Excises and Salt Act, 1944 (1 of 1944): Explanation. - For the purposes of this notification the term 'waste cotton yarn' shall mean - (1) short lengths of cotton yarn in tangled mass not capable of being disentangled without considerable labour, or (2) short lengths not exceeding 3 metres of cotton yarn even if they are not in the form of an entangled mass." 11. The language used is 'yarn spun from cotton waste'. It does not say that yarn spun from cotton waste "exclusively, or wholly or only". If the intention of the Government were to exclude yarn, spun from materials other than cotton waste they would have used the expression 'exclusively or wholly or only'. UOI v. TISCO [1977 (1) ELT J 61]. In the absence of these words there is no reason why the benefit of the exemption notification cannot be extended to the yarn manufactured by the respondents. In the light of the view which we are taking it is not necessary to refer to the arguments advanced by both the sides on the question of interpretation of the test reports.