1. The appelllant is M/s. Decent Dyeing Company. The case relates to a demand for payment of differential duty for the period May,1976 to July,1976 with reference to texturising of base acrylic yarn received by them from manufacturers of such base yarn. They had cleared such texturised yarn on payment of duty at Rs. 10/- per kg. claiming benefit of notification No. 125 of 1975. The differential duty demanded was at Rs. 24/- per kg. leviable on the base yarn. They had denied their liability but the demand had been confirmed by the Asstt. Collector under his order dated 8-1-1983 and the same had been confirmed by the Collector (Appeals) under his order dt. 27.8.83. This appeal is against the order of the Collr. (Appeals).
2. Shri Harbans Singh, Advocate for the appellant contends that duty on base yarn is payable by the manufacturer of the base yarn only and the burden of showing that the said duty had not been paid by the manufacturer is on the department and without reference to this principle the lower authorities had held that the appellant was liable to pay the differential duty since the appellant had failed to prove the payment of duty on the base yarn and therefore the said orders are liable to be set aside. In this connection he relies upon the judgement of the Delhi High Court in Sulekh Ram and Sons v. Union of India [1978 (2) ELT 525] and also the decision of this Tribunal in ED(SB) A. No.2840/83-D under Order No. 210/84-D dated 17.4.84.
3. Shri Sachar appearing for the department contends that it was for the appellant to prove that the duty had been paid on the base yarn if the appellant was to pay the duty at Rs.l0/- per kg. only under the notification relied upon and in the absence of proof of payment of duty on the base yarn, the orders of the lower authorities were correctly passed. He relied up on another judgment of this Tribunal in Appeal Nos. ED(SB)(T) A.Nos. 913/80-C and 1158/80-C under Order Nos. C-51 and 52 of 1984 dated 27.1.84. His contention was that the appellant alone had special knowledge as to whether duty had been paid on the base yarn and therefore the burden of proof the same was on the appellant and not on the department. He contended that reliance placed by the appellant on the judgment in the Sulekh Ram's case was not justified.
4. We have carefully considered the submissions on both sides.
Admittedly, the appellant is not the manufacturer of the base acrylic yarn. The work carried out by the appellant on the base yarn was by way of texturising the same. In respect thereof duty was payable under Tariff Item 18(ii). That reads that rate of duty payable on textured yarn produced out of base yarn is the duty for the time being leviable on the base yarn, if not already, paid plus Rs. 20/- per kg. Under notification No. 125/75 dated 12.5.75, the duty was reduced to the duty for the time being leviable on the base yarn, if not already paid, plus Rs. 10/-per kg. Admittedly, the appellant had paid duty at Rs. 10/- per kg. and had been allowed to clear the goods. The demand for differential duty by way of duty payable on the base yarn is now in dispute.
5. The same question had arisen for consideration in appeal No. ED(SB) 2804/83-D and under judgement dated 17.4.84 and this Tribunal had decided that in such cases the duty on the base yarn could be demanded from the manufacturer only since purchasers of the base yarn from the market could naturally assume that duty on the base yarn would have been paid by the manufacturer before removal and that it was for the department to verify the fact of such payment and take action against the manufacturer if base duty had not been paid. Therefore;, if the said judgment is to be followed in this case also, the appellant will have to be granted the relief prayed for.
6. The reliance on the part of Shri Sachar on another judgement of this Tribunal under order No.C-51&52/84 dated 27.1.84 does not appear to be correct. That judgement referred to the effect of exemption notifications under which if duty, if any, had been paid on the base material, the subsequent manufacturer could claim exemption to that extent when duty is to be paid by him on the commodity manufactured by him. But in the present instance it is not the notification that has to be construed but the tariff item itself in ascertaining the duty payable. Under the tariff item, as pointed out earlier, the duty is fixed at the duty for the time being leviable on the base yarn, if not already paid, plus Rs. 20/-per kg. (reduced to Rs. 10/- per kg. under the notification). The notifn. does not change this position so far as the base duty is concerned. We have already held that in terms of the Sulekh Ram judgement the burden of showing that the base duty had been paid cannot be placed on the processor. Therefore, the authorities would be entitled to claim duty inclusive of the duty leviable on the base yarn only on proof that the duty on the base yarn had not been already paid. Therefore, the onus of proving that duty had not been paid on the base yarn would be on the department. It would not be the burden on the appellant to prove that the duty on the base yarn had been already paid.
7. In these circumstances, the appellant would be well justified, as pointed out in Sulekh Ram's case, in presuming that base duty had been already paid by the manufacturer. In this view it was really not necessary for the appellant to produce proof of payment of payment of base duty by the manufacturer. It may be seen that at least when the appeal was filed before the Collector, the appellant had disclosed the names of the persons from whom they had received the yarn as also the name of the manufacturer, enclosing copies of the relevant records also [vide page 2 of the appeal memorandum before the Collector(Appeals)].
But even at that stage the department had not chosen to verify these facts and the Collector(Appeals) had passed his order merely on the basis that it was for the appellant to prove the actual payment of base duty. For the reasons already stated, this approach on the part of the Collector (Appeals) was not proper. In the circumstances the further argument of Shri Sachar that the appellant alone should have special knowledge of the fact of payment of base duty and it was therefore for the appellant to prove the said fact is also not correct. Reliance on his part on the judgement under Order No. C. 51 & 52/84 is also therefore of no avail.
8. At one stage Shri Harbans Singh stated that he would be willing to have the matter remanded to the lower authorities who could trace the yarn back to the manufacturer and verify whether they had paid duty on it. We asked Shri Harbans Singh whether this meant that the appellant would be prepared to pay the base duty if the Central Excise authorities were unable to trace back the goods and verify the payment of base duty. Shri Harbans Singh then clarified that this was not his intention, since, according to him, the appellants were not, in any case, liable to pay the base duty. In view of this clarification, we consider that no useful purpose would be served by remanding the matter to the lower authorities as suggested by Shri Harbans Singh.
9. On a careful consideration of the submissions on both sides, we therefore hold that the demand of differential duty from the appellant cannot be upheld. Accordingly, we allow this appeal and set aside the impugned demand with consequential relief to the appellant.
10. So far as the cross objection filed by the department, it is seen that no relief had been claimed thereunder, the same containing merely the arguments for the dep-partment and ending with the prayer that the order of the Collector (Appeals) maybe upheld. In the circumstances there is really no cross objections in the real sense. In that view and also in view of the fact that the appeal itself is being allowed, the cross objection is dismissed.