1. The applicant is engaged in the manufacture of twine/cabled yarn since 1993. For this purpose they procured monofilament yarn from outside and only have the facility to twist yarn received from outside and manufacture cabled yarn or twine. This twine is used in the manufacture of nylon fishing net. They have filed declaration from time to time declaring their activity of making nylon fishing net twine which was claimed by them to be classifiable under Chapter Heading 5607.90 and claimed exemption under Notification No. 6/2002 dated 1-3-2002 during the relevant period. This notification exempted all goods falling under Heading 5607 made from yarn, monofilament, strips etc. on which appropriate duty of excise leviable under the first schedule to the Central Excise Tariff Act or as the case may be additional duty leviable under Section 3 of the Central Excise Tariff Act, 1985 has already been paid. The classification of their yarn under Heading 5607 has been accepted by the Department from time to time and no objection was taken to the same. They were later on issued show cause notices alleging that the twine so manufactured by them was not classifiable under Chapter Heading 5607 as the denierage of twine was below 9000 and the same was classifiable under Chapter Heading 54.02.
Notices also sought to deny them the benefit of Notification No. 6/2002 on the ground that the input yarn received by them was wholly exempted from duty of excise and therefore cannot be considered as yarn on which appropriate duty has been paid. The notices further alleged that the denierage of single yarn were not relevant and the denierage of cabled yam/twine is to be taken into account for extending the benefit of exemption. The matter was adjudicated by the Commissioner who confirmed the demand of Rs. 53,31/693/- for the period of September 2002 to March 2003 and another Rs. 46,30,401/- for the period 9th July 2004 to 28th February 2005 and Rs. 49,10,049/- for the period 1st March 2005 to 30th September 2005. A penalty of Rs. 5 lakhs was also imposed.
2. The learned Advocate for the applicants submits that even assuming that the twine manufactured by them is not classifiable under Chapter Heading 5607 as a denierage of yarn is below 9000, they have claimed exemption under Notification No. 30/04 dated 9-7-2004 (Sr. No. 6) vide their letter dated 8-7-2005 addressed to the Jurisdictional Superintendent and has also claimed this exemption in their representation to the CBEC, a copy of which was endorsed to the Commissioner. However since they have taken up the matter with the CBEC, they could not submit the reply to the show cause notice and therefore the matter was adjudicated without taking this plea into consideration. It was however admitted that in their submission later on they have not taken such a plea, but the benefit of Notification 30/2004 cannot be denied to them, even if such plea was not made in their subsequent submissions.
3. As regards the period prior to 9-7-2004 when Notification 30/04 was not in force it was submitted that the demand was time barred as they have filed a relevant declarations from time to time and the Department has not disputed the same. It has been consistent policy of the Government to exempt monofilament and multifilament yarn going into manufacture of fishing nets from duty as is evident from Notification No. 53/91 & Part A&B of Finance Minister speech for Budget 1991-92 where Shri Manmohan Singh, Finance Minister has stated that out of his concern for the welfare of fishermen, he propose to fully exempt from excise duty specified yarns which are generally used for making fish nets. Budget Changes proposed in Budget 1993-94 stated that Nylon and Polypropylene filament yarn of specified denierage meant for use in the fishing nets and parachute chords have been exempted unconditionally without any end-use stipulation. (Notification No. 31/93-C.E. Sr. Nos.
16 & 28). Similarly Notification No. 6/02 exempted nylon filament yarn or polypropylene filament yarn of 210 deniers with tolerance of 6% from full duty and it was stated that yarn of 210 deniers find their use in manufacture of fishing nets only. It was further submitted that as per TRU letter dated 8-7-2004 explaining the changes in Central Excise Tariff by Finance Bill 2004, it was explained that duty structure of textile has been completely i revised and there will be mandatory duty only on man-made fibres i.e. 24% on polypropylene filament yarn and 16% on other filament yarn and man-made fibres. There will not be any duty if the duty paid fibre and filament yarns are subject to any process by any unit which has not made the basic filament yarn or fibre. However, the exemption was optional and the person willing to pay duty could avail of the duty credit paid on yarn/fibres. Thus the scheme was that no duty was payable on intermediate products. It was also submitted that their classification under Chapter Heading 5607 has all along been accepted and the show cause notice does not seek to deny the benefit prior to September 2002 when also similar condition was there as the understanding was that the appropriate duty paid on base yarn will include nil duty also. Thus no suppression with intent to evade duty can be alleged.
4. We have considered the submissions. We find that prima facie the applicants are entitled to exemption under Notification No. 30/04 w.e.f. 9-7-2004 as they have made a claim for such exemption but did not pursue it in their submissions before the adjudicating authority.
The fact that twine has been manufactured out of monofilament/multifilament yarn on which no credit of duty paid has been taken is not in dispute. The exemption cannot therefore prima facie be denied. As regards the period prior to 9-7-2004 we find that the applicants have been classifying their product under Chapter Heading 5607 even though denier-age was below 9000 and this has been understanding of the Department also and the view prevalent till September 2002 was that appropriate duty paid on filament yarn included nil duty also. This view has undergone a change as a result of the decision of the Apex Court in Dhiren Chemical's case. We are therefore prima facie of the view that extended period is not invocable. We accordingly waive the pre-deposit of the entire duty and penalty and stay recovery thereof till disposal of the appeals.