Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Rajasthan Textiles Mills on 15 May, 1992
Equivalent citations: 1992(42)ECR31(TRI.-DELHI)
ORDER K.S. Venkataramani, Member (T)
1. This is an appeal filed by Collector of Central Excise, Jaipur against the order dated 15.4.1991 passed by the Collector of Central Excise (Appeals), New Delhi. The facts in brief are as follows:
(i) M/s. Rajasthan Textile Mills, Bhawanimandi are the manufacturer of single ply yarn falling under the Tariff Item No. 18(III). The single ply yam intended for sale is entered in R.G. 1 register and is cleared on payment on duty at the appropriate rate. The single ply yarn issued for doubling purposes is, however, accounted for by the unit only after doubling. On 27.2.1982 there was balance of 52,992.7 Kgs. of yarn with M/s. Rajasthan Textile Mills, Bhawani mandi that the Central Excise duty on yam falling under Tariff Item 18(111) was reduced from Rs. 18/- per Kg. to Rs. 9/- per Kg. that the total quantity of yarn was cleared on the rate of duty Rs. 9/- per Kg. after 27.2.1982, whereas they should have paid Central Excise duty @ Rs. 18/- per Kg. at the time of clearance on single ply yarn that therefore a demand show cause notice was issued by the Superintendent, Central Excise Range, Rural-I, Kota vide C. No. CE-13/RTM/ 1/83/259 dated 7.2.1983 for Rs. 6,02,159.60 as short levy which was wrongly dropped by the then Assistant Collector, Central Excise, Kota vide his Adjudication Order No. 46(I-CE-Dcmand/85) dated 1.3.1985. Hence the order of Assistant Collector is legally unsustainable.
(ii) Collector, Central Excise, Jaipur being aggrieved by the decision of the Assistant Collector issued vide Order-in-original No. 46/85 and reviewed the said order vide order-in-review No. 30-CE/85 dated 24.12.1985 with direction to make an application with the Collector of Central Excise (Appeals), New Delhi within 3 months. Assistant Collector, Central Excise, Kota had filed an appeal before Collector (Appeals) in pursuance of review order No. 30-CE/85 dated 24.12.1985.
(iii) The Collector (Appeals), Central Excise, New Delhi vide his order-in-appeal No. 83-CE/REV/J PR/91 dated 15.4.1991 rejected the appeal filed by Assistant Collector, Central Excise, Kota.
2. Shri J.N. Nair, learned Departmental Representative appearing for the appellant Collector submitted that the issue in this appeal now stands settled by the decision of this Bench in the case of Collector of Central Excise, Jaipur v. Bhilwara Spinners Ltd. in its Order No. E/396-399/91-D dated 23.9.1991 wherein the Tribunal had held that Central Excise duty is chargeable on all types of yarns falling under Tariff Item 18III, 18A, 18B and 18E of Central Excise Tariff at the single ply stage. He also drew attention to the grounds of appeal to say that single ply yam itself is excisable goods and hence has to discharge duty liability. Ms. Amita Mitra, learned Counsel appearing for the respondents however contended that the Collector (Appeals) in his order in this case has relied upon three decisions of the Tribunal in support of his findings and it has not been shown that these orders had been considered or distinguished in the Bhilwara Spinners case cited by the department. The learned Counsel further urged that these decisions relied upon by the Collector (Appeals) would go to support the proposition that when single ply yarn of the same variety is doubled it would not amount to manufacture of a new commodity attracting Central Excise duty. She also submitted that the Bhilwara Spinners case is factually different wherein the duty was charged at the doubling stage. Further, in the LML case cited in the Tribunal's order dated 23.9.1991, there was no argument that single ply yarn and double yarn is one and the same thing. It was urged that it was for the Department to establish that the two products are different. The learned Counsel also contended that the demand was also time-barred covering a period of over six months under Section 11A of Central Excises and Salt Act, 1944, and also without any allegation of suppression of facts. In reply, the learned Department Representative pointed out that in the orders of the lower authorities there had been no adverse findings at all on limitation for the Department to take it up in appeal.
3. We have carefully considered the submissions made by both the sides herein and it is seen that the Department is right in their plea that the issue is covered by the decision of this Bench in the case of Collector of Central Excise, Jaipur v. Bhilwara Spinners. In that case also the Department had issued Show Cause Notice calling upon the assessee why duty should not be demanded at single ply stage of yarn before the same is subjected to doubling and multifolding, since according to the Department the yam is fully manufactured at single ply stage itself and attracts central excise duty. The Tribunal held, "it is clear that...yarn is a fully manufactured product when it is at the spindle stage and the multifolding of yarn is done only to facilitate the weaving of the cloth...from a reading of the description of item 18III, 18A, 18B, 18E of Central Excise Tariff, it is clear that it answers the description of yarn when it is at the spindle stage". The facts of the present case are no different and hence the ratio of the Bhilwara Spinners decision is applicable. It is also not denied by the appellants that they themselves clear single ply yarn also from their factory which indicates the marketability of the goods as yam at single ply stage. In the result, there is a lot of force in the submissions made in the appeal and those made by the learned Departmental Representative. Accordingly, the appeal is allowed and the impugned order of the Collector (Appeals) is set aside. As regards the question of limitation, this aspect has not at all been adverted to in the proceedings before the lower authorities nor raised before them. There is also no material on record including copy of show cause notice for the Tribunal to consider the issue at this stage. However, in the proceedings consequential to the disposal of this appeal the parties will be at liberty to take up this aspect in a manner known to law. The appeal is disposed cf in the above terms.
Dt. 17.2.1992 Sd/- (K.S. Venkataramani) Member (Technical) S.L. Peeran.
Both the lower authorities have favoured the assessee and hence the Revenue is aggrieved with the orders.
4. The demands raised against the assessee arc in respect of balance on 27.2.1982 of 52,992.7 Kgs. of yam-which according to the department should have been cleared at Rs. 18/- per kg on the yarn falling under Tariff Item 18(III) while the assessee is alleged to have cleared at Rs. 9/- per kg after 27.2.1982. Hence, short levy notice dated 7.2.1983 for Rs. 6,02,159.60 P. was issued for recovery. The Asstt. Collector dropped the proceedings by accepting the plea of the assessee that if the legislature had intended levy/collection of duty at the single yarn stage before the same was used for conversion into doubled yarn, there was no need to add explanation (ii) to Tariff Item 18. Further, if duty is to be charged on single ply yarn stage, the concession granted to on cross reel hanks will become redundant. Similarly the notification allowing exemption to hard waste will become redundant. The Asstt. Collector held that yarn remains yarn even after doubling or multifolding. As such, doubling itself is a process ancillary or incidental, to the completion of manufacture of yarn. He further held that as a result of doubling "any other commodity does not come into being so as to attract duty on single yarn but it is used in the manufacture of doubled multifold yarn. He held that duty was correctly levied at the time of removal of the doubled yarn from the factory.
5. The learned Collector (Appeals) upheld the Asstt. Collector's order and had relied on three rulings including that of in the assessee's own case. The Revenue in this appeal contends that single ply yarn is itself a fully manufactured product and different types of single ply yarn are made use of for the manufacture of doubled yarn. Hence, it is contended that single ply yarn and double ply yarn are not identical in character or use. It is contended that the Revenue has not accepted the order of CEG AT in the assessee's own case rendered in order No. E-370/90-D dated 14.6.1990 and No. 164/87-D dated 23.2.1987.
6. The Revenue are relying now on the rulings rendered in the case of Bhilwara Spinners case in order No. E-396-399/91-D dated 23.9.1991. While on the other hand, the assessee besides relying on the rulings rendered by the Bench in their own case in order No. E-164/87-D dated 23.2.1987, also rely on the following rulings:
Collector of Central Excise, Jaipur v. Jaipur Polyspin Ltd. Order No. E-370/90-D dated 14.6.1990 India Jute Co. Ltd. v. Collector of Central Excise, Calcutta Collector of Central Excise v. Orissa Weavers Cooperative Spinning Mills The General Industrial Society Ltd. v. Collector of Central Excise, Calcutta 1988 (18) ECR 307 (Cegat SB-D) Collector of Central Excise v. Madura Coats Ltd.
Garware Nylons Ltd. v. Union of India
7. I notice (hat the ruling rendered in the assessee's own case in No. 164/87-D dated 23.2.1987 is directly on the same issue as raised in this appeal and it fully covers the issue The Bench comprised of Three Members and they have held that no new commodity has come into existence on doubling of the same types of yarn and therefore, duty was rightly paid at the state of removal of doubled yarn. The Bench had also relied on the ruling rendered in the case of India Jute Co (supra). The same is the ratio rendered in the case of Jaipur Polyspin Ltd. in order No. 370/90-D. The other rulings relied by the assessee is also on the same issue. Therefore, the ruling rendered in the case of Bhilwara Spinners case relied by the learned Departmental Representative is clearly distinguishable. The Bench in Bhilwara Spinners case has not given any reasons to differ with the earlier rulings. The judicial norms require that the matter should have been referred to a larger Bench if the Bench in Bhilwara Spinners case desired to take a different view.
8. As I have noticed that the rulings relied by the assessee is directly on the issue, I do not find any reason to differ from the same. Therefore, applying the said ratio, the appeal is required to be dismissed and I order accordingly.
Dt. 18.2.1992 Sd/-(S.L. Peeran) Member (Judicial) K.S. Venkataramani
9. In view of the separate orders proposed by the Members, the following point of difference arises which is forwarded to the Hon'ble President for reference to a third Member as per Section 129C(5) Customs Act, 1962 as made applicable to Central Excises and Salt Act, 1944.
10. Whether duty should be paid or not on single ply yarn under item 18III C.E.T. before it is removed for manufacture of doubled yarn.
Dt. 20.2.1992 Sd/- (K.S. Venkataramani), M(T) Sd/- (S.L. Peeran), M(J) The point of difference is referred to Shri P.K. Kapoor, Member (Technical) Dt. 20.2.1992 Sd/- (Harish Chander) President P.K. Kapoor
11. I have heard Shri J.N. Nair, learned departmental representative for the appellant and Shri Ravinder Narain, learned advocate for the respondents.
12. The facts of the case having been set out in the order recorded by learned Member (T), Shri K.S. Venkataramani do not need to be repeated.
13. On behalf of the appellant Shri Nair relied upon the Tribunal's order No. E/396-399/91-D dated 23.9.1991 in the case of Bhilwara Spinners Ltd. wherein it was held that on all types of yarn falling under Tariff Item 18III, 18A, 18B, and 18E Central Excise duty was chargeable at the single ply stage. He argued that single ply yarn being an excisable item, such yarn could be cleared from the factory or removed for captive consumption for carrying out process such multifolding only after discharging the duty liability. Shri Nair pointed out that in the case of Bhilwara Spinners the Tribunal had followed the ratio of the decision in the case of L.M.L. Ltd. v. Collector of Central Excise wherein it was held that mother yarn or multifilament yarn was a different commodity from split yarn or mono-filament yarn and Item 18-III was wide enough to cover mother yarn and split yam which were considered different products.
14. In his reply Shri Ravinder Narain stated that Member (Technical) had relied only on the decision in the case of Collector of Central Excise, Jaipur v. Bhilwara Spinners and he failed to take note of the decisions which were relied upon by the assessee and which have been listed in the order recorded by the Member (Judicial). He pointed out that the Collector (Appeals) had upheld the Assistant Collector's finding that in case the legislature had intended levy of duty at the single yarn stage before the use of yarn for conversion into double yarn, there would not have been any need for the incorporation of Explanation-II to Tariff Item 18. He added that the Collector (Appeals) relied upon three rulings including the ruling by a Bench of three members in appellants' own case in order No. 164/87-D dated 23rd February, 1987 and upheld the Assistant Collector's finding that doubling was a process incidental or ancillary to the completion of manufacture" of yarn and as a result of doubling no new commodity comes into being warranting levy of duty at the single yarn stage. Shri Ravinder Narain further added that in order No. 164/87-D the Bench had relied on the ruling rendered in the case of India Jute Co. and order No. E/370/90-D dated 14.6.1990 in the case of Collector of Central Excise, Jaipur v. Jaipur Polyspin Ltd. He contended that the ratio of the Calcutta High Court's decision in the case of Collector of Central Excise v. Madura Coats Ltd. against which the Department's appeal was rejected in limine by the Supreme Court, also supports the appellants' case. The learned Advocate stated that the decisions in the remaining cases listed in the order recorded by Member (Judicial) also support the assessee's case. He contended that the department's appeal merits rejection since all the decisions analysed by Member (Judicial) were in favour of the assessee whereas the decision in the case of Bhilwara Spinners which had been relied upon by the appellant was distinguishable since it adopted the Tribunal's decision in the case of L.M.L. Ltd. v. Collector of Central Excise which related to a different commodity viz., mother yarn or multifilament yarn.
15. I have carefully considered the submissions made on behalf of both sides. I find that the appellants' case rests entirely on the Tribunal's decision in the case of Collector of Central Excise v. Bhilwara Spinners (supra) in which reliance was placed on the decision of the Tribunal in the case of L.M.L. Ltd. v. Collector of Central Excise (supra). In the case of L.M.L. Ltd. v. Collector of Central Excise it was held that even though mother yarn and split yarn were both classifiable under the same tariff item, the two items being different products, mother yarn or multifilament yarn when cleared by the assessee for conversion into split yarn had to be deemed as dutiable under Item 18-II. It is seen that in order No. E/396-399/91-D in the case of Collector of Central Excise, Jaipur v. Bhilwara Spinners Ltd. while following the ratio of the decision in the case of L.M.L. Ltd. the Tribunal had overlooked the fact that unlike mother yarn and split yarn which had been held to be different products, in a series of decisions of the Tribunal and High Courts, it had been held that conversion of single ply yarn into double yarn or even multifold yarn does not result into any new product. For these reasons and also in view of the fact that in the case of Bhilwara Spinners case the Bench has not given any reason for differing from the earlier rulings, I agree with learned brother Shri Peeran that the decision in the case of Bhilwara Spinners is distinguishable.
16. The respondents have referred to order No. 164/87-D dated 23.2.1987 in their own case and numerous other decisions listed in the order recorded by learned brother Shri S.L. Peeran wherein it has been held that duty would be recoverable at the stage of removal of double yarn since no new commodity comes into existence as a result of doubling of yarn. Apart from these decisions, it is seen that in the case of Piramal Spinning and Weaving Mills Ltd. v. Union of India and Ors. reported in 1982 ELT 145 : 1982 ECR 40D (Bombay) the Hon'ble Bombay High Court had also held that mere blending or twisting of cotton yarn with nylon yarn does not amount to manufacture since the process does not result into a commercially different or distinct product. Paragraph 14 of the said -decision being relevant is reproduced below:
From the process of manufacture mentioned in the above paragraph and in respect of which there is no dispute, it is obvious that by merely intertwining the strands of cotton yarn and nylon yarn it is difficult to hold that the new product comes into existence. Shri Andhyarujina is right in his submission that the process adopted by the petitioners could not be treated by holding as manufacture under Section 2(f) of the Act. Shri Andhyarujina submits that the weft yarn in question was nothing but a combination of two duty paid yarns and the weft yam was neither spun nor made capable of being used in the weaving of fabrics. Shri Andhyarujina invited my attention to the decision of Supreme Court reported in (1975) 35 S.T.C. 634 in the case of Commissioner of Sales Tax U.P. Sarin Textile Mills and pointed out that yarn is not being defined either in the Act and the Rules or under any notification. According to the Oxford Dictionary yarn means "Any spun thread specially of kinds prepared for weaving, knitting or rope-making". While Webster's New World Dictionary defines it as "Any fibre, as wool, silk, flax, cotton, nylon, etc., spun into strands for weaving, knitting or making thread." The Supreme Court after quoting the dictionary meanings, observed that the fibre in order to answer the description of 'yarn' in the ordinary commercial sense must have two characteristics - firstly, it should be a spun strand, and secondly, such strand should be primarily meant for use in weaving, knitting or rope-making. Respondent No. 6 in his order in paragraph 18 and 19 has made reference to the conditions and has observed that the second condition was satisfied. Respondent No. 6 has not recorded any finding about the first condition. Shri Andhyarujina submits that the twinkling yarn did not satisfy the first condition, that it should be spun and therefore respondent No. 6 was in error in treating it as a new product being a twinkle yam. Respondent No. 6 has observed in paragraph 17 of his order that the weft in question was used for making closely woven fabrics and that indicates that the weft yarn could riot be loose state. According to respondent No. 6 that implies that the yarn was closely twisted and the nylon yam constituted in the twist had one from the other was rendered difficult and could not be done without damaging the form of the yarn. This finding of respondent No. 6 is clearly contrary to the affidavit filed by Shri Thomas and to which a reference is made hereinabove, where the deponent has stated that the two yams could be separated without any damage to the yam. Respondent No. 6 in paragraph 20 of the impugned order held that the petitioners adopted the process of blending of cotton yam and nylon yam with a desire to give a twinkling effect to the fabrics and therefore the yam manufactured by intermixing had a distinct use and utility, and therefore, the product was qualified for being treated as goods. It is difficult to accept this finding because in every case when a process is carried out on any article, it is with intention or desire to have a better effect or use of the original article. There fact that the blending was done with a desire to give a twinkling effect to the fabric is no answer to the claim that design or blending did not bring into existence a new product. In my judgment, the view taken by the respondent No. 6 that the process undertaken by the petitioners amounted to manufacture and the result of blending was to bring into existence a new product is not correct. The respondent No. 6 was clearly in error in holding that the different product came into existence by virtue of the composition and process of manufacture as the two different yams were combined.
17. On the ratio of the Judgment of the Bombay High Court cited above, and the decision relied upon by the respondents I hold that conversion of single ply yam into double or multifold yam does not result into and new product. In this view of the matter, I agree with the order recorded by the learned brother Shri Peeran, Member (Judicial).
As per the majority view above, there is no reason to interfere with the order passed by the Collector of Central Excise (Appeals), New Delhi and the appeal is accordingly rejected.