1. The facts of this case are briefly as follows. During the period from 17-3-72 to 23-7-72, the appellants were working under the special procedure, commonly known as the compounded levy scheme, prescribed in Rule 96W of the Central Excise Rules, 1944, read with notification No.62/72-C.E., dated 17-3-72, in respect of the specified type of mixed yarn containing more than 40% by weight of cotton which they were manufacturing and using captively for making fabrics. Such yarn was classifiable under item 18E of the Central Excise Tariff. Though the normal rate of duty for such yarn was in terms of so many rupees per kilogram, the compounded levy scheme fixed a sum in terms of so many paise per square metre of the fabric made from such yarn. Such sum was in lieu of the normal duty liability on yarn and was payable at the time of clearance of the fabrics. For the aforesaid type of yarn, this compounded levy scheme stood withdrawn on 24-7-72 and the normal duty at the rates specified in notification No. 168/72-CE dated 24-7-72 became payable. On the midnight of 23/24-7-72, the appellants held in stock a certain quantity of such yarn and also some quantity of fabrics produced out of such yarn. The dispute in this case relates to whether the appellants were liable to pay the normal yarn duty in respect of such yarn held in stock as well as such yarn contained in the fabrics held in stock on the crucial date.
2. The appellants contended that their duty liability under notification No. 62/72-CE in respect of such yarn was already determined prior to the crucial date but because of Rule 96W(3) such liability was kept in abeyance since the said rule required this payment to be made along with the duty on fabrics and that the duty at spindle point (that is, the normal rate) in terms of notification No.168/72-CE was payable only in respect of the yarn manufactured after the midnight of 23/24-7-72. The lower authorities, however, took the view that since with effect from 24-7-72 compounded levy rates ceased to exist, there was no basis for application of the rates which did not exist for such yarn "on the date of clearance of such cloth".
3. During the hearing before us today, the appellants relied on the following case law in support of their case :- (1) 1978 ELT (J-33)-M.P. Indore Bench (Kriloskar Bros. Ltd. Dewas v. U.O.I. and Ors.).
(2) 1978 ELT (J-690)-M.P. Jabalpur Bench (U.O.I. v. Kirloskar Bros.
(3) 1981 ELT 274 (Guj.) (Aryodaya Spg. and Wvg. Co. Ltd. v. U.O.I. and Ors.).
(4) 1982 ELT 457 (Bom.) (Shriam Mills Ltd. and Anr. v. U.O.I. and Ors.) (5) Bombay High Court judgment dated 4-10-79 in Misc. Petition: No. 728 of 1975 (The Shreenivas Cotton Mills Ltd. v. C.L. Nangia Appellate Collector and Ors.).
(6) Bombay High Court judgment dated 4-10-79 in Misc. Petition No. 773 of 1975 (Rajesh Textile Mills Ltd. v. M.L. Badhwar and Ors.).
The Department's representative stated that in a similar case of M/s, Raipur Mfg. Co. Ltd. (Appeal No; 61/76-D), this Tribunal had already passed the order No. D-l70/83 dated 2-4-83 which was favourable to the appellants and that in view thereof he had nothing further to say.
4. We have carefully considered the matter. The two judgments of M.P.High Court cited at (1) and (2) above relate to interpretation of Rules 9, 9A and. 49 in relation to power driven pumps manufactured at a time when such pumps. were exempt from duty. These judgments do not apply to the facts of the present case which relates to determination of duty liability under the compounded levy scheme under Rule 96W. Bombay and Gujarat High Court judgments cited at (3) and (4) above also relate to interpretation of Rule 9A but the point decided therein that levy of excise duty on yarn at the rate in force on the date of removal of the fabrics is not sustainable in law is relevant for the present appeal in so far as it demolishes the Department's case for charging yarn duty at the rate in force on the date of removal of the fabrics when in fact the said yarn had already been removed for the manufacture of fabrics during the currency of the compounded levy scheme. However, the case law directly relevant to the present appeal is the one cited at (5) and (6) above in which the facts as well as the issues involved were similar. So was also the Tribunal's, earlier order No. D-170/83 cited by the Department's representative. The Bombay High Court held in the above two judgments that the principles involved in Rules 9 and 9A were not included or incorporated in Rule 96W, that the date of clearance of the fabrics had no relevance whatsoever to the levy of excise duty in regard to the manufacture of yarn by the petitioners and that the petitioners' liability to pay the duty on yarn must be determined with reference to the rules prevailing on the date of actual manufacture.
The Tribunal in its aforesaid order held that the compounded levy scheme contained in Section E-VI of the Central Excise Rules was more or less a self-contained code, that the provisions of other normal rules like Rules 9 and 9A were not applicable to it, that in respect of the yarn manufactured and permitted to be removed for captive consumption under the compounded levy scheme, the duty liability had to be determined at compounded rates in terms of notification No.62/72-C.E. which liability had to be discharged only at the time of clearance of the fabrics and that denying such benefit would be doing violence to the whole scheme of the compounded levy procedure.
5. The Department has cited no contrary judgment or order on the interpretation of Rule 96W and we find no reason to disagree with the ratio of the earlier Tribunal Order. We would like to add that even if it were to be argued that the compounded levy scheme ceased with effect from 24-7-72 and from that onwards the normal rules including Rule 9A became applicable, still the normal rate of duty effective from 24-7-72 could not be applied retrospectively to the yarn which had been authorisedly removed (that is, taken for captive use in the manufacture of fabrics) much earlier. The date of clearance of fabrics was irrelevant for computing the normal duty for yarn. Accordingly, we allow this appeal with consequential relief to the appellants.