Hindustan Spg. and Wvg. Mills Ltd. Vs. Collector of C. Ex. - Court Judgment

Excerpt:
1. the issue for determination herein is the eligibility of cotton yarn waste arising at the stage of weaving of fabrics (i.e. subsequent to the spinning stage) for the benefit of exemption from excise duty in terms of notification no. 95/61.2. the brief facts of the case are that the appellants carry on the business of manufacture of textiles including cotton fabrics, cotton yarn and cellulosic spun yarn. they have a manufacturing unit which is a composite mill engaged in spinning yarn and weaving cloth. they had been paying excise duty on yarn under the compounded levy scheme (which was abolished on 18-6-1977). notification 95/61 was issued on 1-4-1961, granting complete exemption inter alia to yarn waste arising in a textile mill. the department was of the view that this notification applied only to waste which arises in the spinning department of the mill and not to waste arising in the weaving department. demands for rs. 2,25,939.35 and rs. 8,53,935.53 were confirmed by the adjudicating authority. the lower appellate authority held that one demand for rs. 8,29,063.22 was barred by limitation and hence not enforceable and directed that the second demand for rs. 2,25,939.35 be revised subject to verification as to the extent to which the appellants had already in-cluded weight of yarn representing normal waste during course of manufacture of yarn. hence this appeal.3. we have heard dr. p.v. jois, learned counsel and shri j.n. nair, learned d.r.4. dr. jois submits that the matter stands concluded in the appellants' favour by the decision of the tribunal in the case of shree yamuna mills [1985 (20) elt 353] wherein it was held that the benefit of notification no. 95/61 can be extended to cotton waste resulting on sizing of yarn/sizing being a process incidental or ancillary to the completion of manufacture of yarn excisable to duty under t.i. 18a, and is not restricted only to waste resulting at the spindle point.5. the learned dr, however, placed before us 3 decisions of the tribunal on the interpretation of the aforesaid notification and notification no. 172/72, dated 24-7-1972 wherein the view taken was that yarn waste arising subsequent to the spindle waste (i.e. at the stage of weaving of yarn) is excisable. in order no. 218 and 218-a/86-d, dated 14th april, 1986 [c.c.e., indore v. rajkumar mills ltd.] the contention of the department that the composite mill is liable to pay duty on the entire quantity of yarn issued for manufacture of fabrics that it follows that the wastage which occurs since the issue of yarn and during the weaving of fabrics is also liable to be charged to duty and is not exempted in terms of notification no. 95/61 was upheld by the tribunal. the interpretation of notification no. 172/72, dated 24-7-1972 arose in the case of the new great eastern spinning and weaving co. ltd. v. c.c.e., bombay [order no. 366 to 368/88-d, dated 23-5-1988] and the tribunal following the ratio of the rajkumar mills case held that the terms of exemption in both notifications are essentially the same. the tribunal laid down that "having regard to the scheme of collection of duty of excise on goods manufactured in a factory and removed for manufacture of another commodity in the same factory and in particular, the provisions of rule 49a, we have no reason to differ from the decision of the tribunal dated 14-4-1986 in the said case of m/s. rajkumar mills." these orders were followed by the bench in the case of shree balajee spinning and weaving mills v. c.c.e., pune 6. we see no reason to differ from the above view (arrived at after a detailed discussion) which applies on all fours to the facts of this appeal. the decision in the shree yamuna mills case is not applicable as it deals with sizing waste and we have no material on record to establish that the weaving waste is only sizing waste. we, therefore, uphold the impugned order and dismiss the appeal.

Judgment:
1. The issue for determination herein is the eligibility of cotton yarn waste arising at the stage of weaving of fabrics (i.e. subsequent to the spinning stage) for the benefit of exemption from excise duty in terms of Notification No. 95/61.

2. The brief facts of the case are that the appellants carry on the business of manufacture of textiles including cotton fabrics, cotton yarn and cellulosic spun yarn. They have a manufacturing unit which is a composite mill engaged in spinning yarn and weaving cloth. They had been paying excise duty on yarn under the compounded levy scheme (which was abolished on 18-6-1977). Notification 95/61 was issued on 1-4-1961, granting complete exemption inter alia to yarn waste arising in a textile mill. The Department was of the view that this notification applied only to waste which arises in the spinning department of the mill and not to waste arising in the weaving department. Demands for Rs. 2,25,939.35 and Rs. 8,53,935.53 were confirmed by the adjudicating authority. The lower appellate authority held that one demand for Rs. 8,29,063.22 was barred by limitation and hence not enforceable and directed that the second demand for Rs. 2,25,939.35 be revised subject to verification as to the extent to which the appellants had already in-cluded weight of yarn representing normal waste during course of manufacture of yarn. Hence this appeal.

3. We have heard Dr. P.V. Jois, learned Counsel and Shri J.N. Nair, learned D.R.4. Dr. Jois submits that the matter stands concluded in the appellants' favour by the decision of the Tribunal in the case of Shree Yamuna Mills [1985 (20) ELT 353] wherein it was held that the benefit of Notification No. 95/61 can be extended to cotton waste resulting on sizing of yarn/sizing being a process incidental or ancillary to the completion of manufacture of yarn excisable to duty under T.I. 18A, and is not restricted only to waste resulting at the spindle point.

5. The learned DR, however, placed before us 3 decisions of the Tribunal on the interpretation of the aforesaid Notification and Notification No. 172/72, dated 24-7-1972 wherein the view taken was that yarn waste arising subsequent to the spindle waste (i.e. at the stage of weaving of yarn) is excisable. In order No. 218 and 218-A/86-D, dated 14th April, 1986 [C.C.E., Indore v. Rajkumar Mills Ltd.] the contention of the Department that the composite mill is liable to pay duty on the entire quantity of yarn issued for manufacture of fabrics that it follows that the wastage which occurs since the issue of yarn and during the weaving of fabrics is also liable to be charged to duty and is not exempted in terms of Notification No. 95/61 was upheld by the Tribunal. The interpretation of Notification No. 172/72, dated 24-7-1972 arose in the case of the New Great Eastern Spinning and Weaving Co. Ltd. v. C.C.E., Bombay [Order No. 366 to 368/88-D, dated 23-5-1988] and the Tribunal following the ratio of the Rajkumar Mills case held that the terms of exemption in both Notifications are essentially the same. The Tribunal laid down that "having regard to the scheme of collection of duty of excise on goods manufactured in a factory and removed for manufacture of another commodity in the same factory and in particular, the provisions of Rule 49A, we have no reason to differ from the decision of the Tribunal dated 14-4-1986 in the said case of M/s. Rajkumar Mills." These orders were followed by the Bench in the case of Shree Balajee Spinning and Weaving Mills v. C.C.E., Pune 6. We see no reason to differ from the above view (arrived at after a detailed discussion) which applies on all fours to the facts of this appeal. The decision in the Shree Yamuna Mills case is not applicable as it deals with sizing waste and we have no material on record to establish that the weaving waste is only sizing waste. We, therefore, uphold the impugned order and dismiss the appeal.