Collector of Central Excise Vs. Dawn Mills Co. Ltd. - Court Judgment

Excerpt:
1. these are five appeals filed by the department involving common issue and, therefore, they are clubbed together and are being disposed of by this common order.2. heard shri lakhinder singh, jcdr on behalf of the revenue and the respondents were represented by shri m.h. patil, advocate accompanied by shri arun mehta, advocate. (1) whether central excise duty on yarn is leviable on single yarn at spindle point as per the department or duty is payable on doubled yarn at the time of clearance, as claimed by the assessees. (2) whether duty on sized weight of the yarn is payable as per the department or duty is payable on unsized weight of the yarn is claimed by the assessee.4. shri lakhinder singh, jcdr appearing for the revenue, submitted that issue with reference to levy of single yarn at spindle point is no longer res integra in view of the decision of the supreme court in the case of c.c.e., jaipur v. banswara synthetic ltd. reported in 1996 (88) e.l.t. 645. he submitted that this was view taken by the supreme court even earlier as can be seen in the case of bhilwara spinners ltd. v.c.c.e. reported in 1996 (82) e.l.t. 442. on the other hand, shri m.h.patil submitted that the tribunal has been consistently taking the view that duty is leviable on doubled yarn at the time of clearance and in support of his contention, he referred to the series of decisions including the latest in the case of poddar projects ltd. v. c.c.e.reported in 1997 (21) rlt 830. he said that even subsequent to the passing of the supreme court judgment in the case of banswara synthetics ltd., referred above, the tribunal has taken the view that duty was leviable on doubled yarn at the time of clearance. to a specific query, he stated that the tribunal has not taken note of the decision of the supreme court in the case of banswara and bhilwara cases (supra) while deciding the issue that duty is leviable on doubled yarn.5. in the case of banswara synthetics ltd., the supreme court has categorically held that a single yarn is first manufactured thereafter it is doubled or multi-folded depending upon the type of fabric, which is ultimately to be woollen. the liability to excise duty would arise on the manufacture of the single ply yarn and not after the same has been doubled or multi-folded. doubling or multi-folding of the same yarn does not bring into existence a new product and no duty is leviable at that stage. in view of this categorical finding that duty is leviable on single yarn at the spindle point, following the ratio of the aforesaid decision, we hold that duty is leviable on single yarn at spindle point. accordingly, the department succeeds on this issue in all these appeals.6. as regards second issue, we find that this issue has been settled by the supreme court in the case of ahmcdabad manufacturing and chemical co. ltd. v. union of india reported in 1993 (63) e.l.t. 601 white confirming the earlier view in the case of j.k. spg. and wvg. mills ltd. and ors. v. uoi and ors. reported in 1987 (32) e.l.t. 234. the observation made by the supreme court in the case of j.k. spg. and wvg.mills at para 46 of the order, is relevant and same is reproduced as under : "in the instant case, the appellants are liable to pay excise duty on the yarn which is obtained at an intermediate stage and, thereafter, further processed in an integrated process for weaving the same into fabrics. although, it has been alleged that the yarn is obtained at an intermediate stage of an integrated process of manufacture of fabrics, it appears to be not so. after the yarn is produced it is sized and, thereafter, subjected to a process of weaving the same into fabrics. be that, as it may, as we have held that the commodity which is obtained at an intermediate stage of an integrated process of manufacture of another commodity, is liable to the payment of excise duty, the yarn that is produced by the appellants is also liable to payment of excise duty. in our view, the high court by the impugned judgment has rightly held that the appellants are not liable to pay any excise duty on the yarn after it is sized for the purpose of weaving the same into fabrics. no distinction can be made between unsized yarn and sized yarn, for the unsized yarn when converted into sized yarn does not lose its character as yarn." in view of this, it is settled that duty is payable on unsized weight of the yarn as claimed by the assessee and accordingly, assessee succeeds on this issue in all the appeals.7. it was submitted by shri m.h. patil that in appeal no. e/3430/89-d, as can be seen from the impugned order, the dispute was with reference to the approval of the classification list and no demand was involved therein. he also referred to the relevant show cause notice and the order passed by the assistant collector in support of his contention.he said that consequent to the approval of this classification list, department has raised demand against which the assessee has filed an appeal before the collector (appeals) and same was dropped by the collector allowing the appeal. no appeal has been filed by the department against such an order of dropping the demand. but the department has erroneously shown the demand of rs. 15,65,594.70 in column no. 8a in form e-a3 which is wrong. it is replied by shri lakhinder singh, jcdr that since the demand was consequence to the issue and the main issue is concerned whether duty is leviable on single yarn at spindle point or on double yarn at the time of clearance and since the issue has already been decided by the supreme court in the case referred to above, the demand consequent to the issue is sustainable.8. on going through the submissions and on perusal of the records, we find that there is some force in the arguments advanced on behalf of the respondents since the party has filed an appeal against the demand and same has been dropped by the collector and no appeal has been filed by the department against such order, the demand is not sustainable.9. in appeal no. e/4245/90-d, according to shri m.h. patil, the department has challenged the portion of the o/a holding that duty is payable on unsized weight of yarn and not challenged the issue relating to the levy of duty on yarn at spindle point. hence, the department cannot take a new plea at this stage with reference to levy of duty on single yarn. it was argued on behalf of the revenue that sized or unsized weight of yarn was not an issue before the authorities below and on the other hand, the assistant collector has given a categorical finding that duty is leviable on single yarn at spindle point. the collector (appeals), has exceeded jurisdiction in deciding the issue on sized and unsized yarn and without going into the issue which has been considered by the assistant collector. after taking the over all facts and circumstances of the case and in view of the clear finding by the assistant collector that duty was leviable on single yarn at spindle point and same has been disturbed by the collector's order and against which the department has come before us, we are of the view that with reference to the levy of duty on single yarn is not a new point and being the point of law can be raised even at this stage, and on admitting that point and on consideration, accordingly, we hold that duty is leviable on single yarn at spindle point following the ratio of the decision of the supreme court in the case of bansivara synthetics, referred to above.10. shri m.h. patil submitted that the department has taken at random 3 per cent of the clearances quantity as the difference in weight between yarn at the spindle point and at clearance stage instead of taking actuals or based on technical normal of 0.35 per cent approximately.shri lakhinder singh, jcdr submitted that no evidence has been placed before the adjudicating authority to arrive at the proper conclusion in determining the percentage of losses and accordingly the department was justified in determining at 3 per cent. it was submitted by shri patil that no particulars were called for and no opportunity has been given to the party to adduce the evidence in support of the claim made by the assessee. in the facts and circumstances, we are of view that this issue requires reconsideration. accordingly, we are remanding the matter to the concerned assistant commissioner to determine the percentage of loss after providing an opportunity to the assessee. the assessee may make use of this opportunity and adduce the evidence in support of their claim during the readjudication proceedings on this issue. it was submitted by shri patil that in remaining two appeals, the main two issues referred to above, were involved. on the other hand, it was submitted by shri lakhinder singh, jcdr that issue with reference to spindle point was involved and not the issue concerned with unsized weight. we have already given clear finding that on the first issue the department succeeds and on the second issue party succeeds in view of the foregoing conclusion following the supreme court decisions.11. accordingly, all the five appeals are disposed of in the above terms.

Judgment:
1. These are five appeals filed by the department involving common issue and, therefore, they are clubbed together and are being disposed of by this common order.

2. Heard Shri Lakhinder Singh, JCDR on behalf of the Revenue and the respondents were represented by Shri M.H. Patil, Advocate accompanied by Shri Arun Mehta, Advocate.

(1) Whether Central Excise duty on yarn is leviable on single yarn at spindle point as per the department or duty is payable on doubled yarn at the time of clearance, as claimed by the assessees.

(2) whether duty on sized weight of the yarn is payable as per the department or duty is payable on unsized weight of the yarn is claimed by the assessee.

4. Shri Lakhinder Singh, JCDR appearing for the revenue, submitted that issue with reference to levy of single yarn at spindle point is no longer res integra in view of the decision of the Supreme Court in the case of C.C.E., Jaipur v. Banswara Synthetic Ltd. reported in 1996 (88) E.L.T. 645. He submitted that this was view taken by the Supreme Court even earlier as can be seen in the case of Bhilwara Spinners Ltd. v.C.C.E. reported in 1996 (82) E.L.T. 442. On the other hand, Shri M.H.Patil submitted that the Tribunal has been consistently taking the view that duty is leviable on doubled yarn at the time of clearance and in support of his contention, he referred to the series of decisions including the latest in the case of Poddar Projects Ltd. v. C.C.E.reported in 1997 (21) RLT 830. He said that even subsequent to the passing of the Supreme Court judgment in the case of Banswara Synthetics Ltd., referred above, the Tribunal has taken the view that duty was leviable on doubled yarn at the time of clearance. To a specific query, he stated that the Tribunal has not taken note of the decision of the Supreme Court in the case of Banswara and Bhilwara cases (supra) while deciding the issue that duty is leviable on doubled yarn.

5. In the case of Banswara Synthetics Ltd., the Supreme Court has categorically held that a single yarn is first manufactured thereafter it is doubled or multi-folded depending upon the type of fabric, which is ultimately to be woollen. The liability to excise duty would arise on the manufacture of the single ply yarn and not after the same has been doubled or multi-folded. Doubling or multi-folding of the same yarn does not bring into existence a new product and no duty is leviable at that stage. In view of this categorical finding that duty is leviable on single yarn at the spindle point, following the ratio of the aforesaid decision, we hold that duty is leviable on single yarn at spindle point. Accordingly, the department succeeds on this issue in all these appeals.

6. As regards second issue, we find that this issue has been settled by the Supreme Court in the case of Ahmcdabad Manufacturing and Chemical Co. Ltd. v. Union of India reported in 1993 (63) E.L.T. 601 white confirming the earlier view in the case of J.K. Spg. and Wvg. Mills Ltd. and Ors. v. UOI and Ors. reported in 1987 (32) E.L.T. 234. The observation made by the Supreme Court in the case of J.K. Spg. and Wvg.

Mills at Para 46 of the order, is relevant and same is reproduced as under : "In the instant case, the appellants are liable to pay excise duty on the yarn which is obtained at an intermediate stage and, thereafter, further processed in an integrated process for weaving the same into fabrics. Although, it has been alleged that the yarn is obtained at an intermediate stage of an integrated process of manufacture of fabrics, it appears to be not so. After the yarn is produced it is sized and, thereafter, subjected to a process of weaving the same into fabrics. Be that, as it may, as we have held that the commodity which is obtained at an intermediate stage of an integrated process of manufacture of another commodity, is liable to the payment of excise duty, the yarn that is produced by the appellants is also liable to payment of excise duty. In our view, the High Court by the impugned judgment has rightly held that the appellants are not liable to pay any excise duty on the yarn after it is sized for the purpose of weaving the same into fabrics. No distinction can be made between unsized yarn and sized yarn, for the unsized yarn when converted into sized yarn does not lose its character as yarn." In view of this, it is settled that duty is payable on unsized weight of the yarn as claimed by the assessee and accordingly, assessee succeeds on this issue in all the appeals.

7. It was submitted by Shri M.H. Patil that in Appeal No. E/3430/89-D, as can be seen from the impugned order, the dispute was with reference to the approval of the classification list and no demand was involved therein. He also referred to the relevant show cause notice and the order passed by the Assistant Collector in support of his contention.

He said that consequent to the approval of this classification list, department has raised demand against which the assessee has filed an appeal before the Collector (Appeals) and same was dropped by the Collector allowing the appeal. No appeal has been filed by the department against such an order of dropping the demand. But the department has erroneously shown the demand of Rs. 15,65,594.70 in column No. 8A in Form E-A3 which is wrong. It is replied by Shri Lakhinder Singh, JCDR that since the demand was consequence to the issue and the main issue is concerned whether duty is leviable on single yarn at spindle point or on double yarn at the time of clearance and since the issue has already been decided by the Supreme Court in the case referred to above, the demand consequent to the issue is sustainable.

8. On going through the submissions and on perusal of the records, we find that there is some force in the arguments advanced on behalf of the respondents since the party has filed an appeal against the demand and same has been dropped by the Collector and no appeal has been filed by the department against such order, the demand is not sustainable.

9. In Appeal No. E/4245/90-D, according to Shri M.H. Patil, the department has challenged the portion of the O/A holding that duty is payable on unsized weight of yarn and not challenged the issue relating to the levy of duty on yarn at spindle point. Hence, the department cannot take a new plea at this stage with reference to levy of duty on single yarn. It was argued on behalf of the revenue that sized or unsized weight of yarn was not an issue before the authorities below and on the other hand, the Assistant Collector has given a categorical finding that duty is leviable on single yarn at spindle point. The Collector (Appeals), has exceeded jurisdiction in deciding the issue on sized and unsized yarn and without going into the issue which has been considered by the Assistant Collector. After taking the over all facts and circumstances of the case and in view of the clear finding by the Assistant Collector that duty was leviable on single yarn at spindle point and same has been disturbed by the Collector's order and against which the department has come before us, we are of the view that with reference to the levy of duty on single yarn is not a new point and being the point of law can be raised even at this stage, and on admitting that point and on consideration, accordingly, we hold that duty is leviable on single yarn at spindle point following the ratio of the decision of the Supreme Court in the case of Bansivara Synthetics, referred to above.

10. Shri M.H. Patil submitted that the department has taken at random 3 per cent of the clearances quantity as the difference in weight between yarn at the spindle point and at clearance stage instead of taking actuals or based on technical normal of 0.35 per cent approximately.

Shri Lakhinder Singh, JCDR submitted that no evidence has been placed before the adjudicating authority to arrive at the proper conclusion in determining the percentage of losses and accordingly the department was justified in determining at 3 per cent. It was submitted by Shri Patil that no particulars were called for and no opportunity has been given to the party to adduce the evidence in support of the claim made by the assessee. In the facts and circumstances, we are of view that this issue requires reconsideration. Accordingly, we are remanding the matter to the concerned Assistant Commissioner to determine the percentage of loss after providing an opportunity to the assessee. The assessee may make use of this opportunity and adduce the evidence in support of their claim during the readjudication proceedings on this issue. It was submitted by Shri Patil that in remaining two appeals, the main two issues referred to above, were involved. On the other hand, it was submitted by Shri Lakhinder Singh, JCDR that issue with reference to spindle point was involved and not the issue concerned with unsized weight. We have already given clear finding that on the first issue the department succeeds and on the second issue party succeeds in view of the foregoing conclusion following the Supreme Court decisions.

11. Accordingly, all the five appeals are disposed of in the above terms.