ORDER
Shri C. Satapathy, Member (Technical)
1. Heard both sides. The dispute in these appeals relate to payment of interest on yarn duty in respect of yarn manufactured and consumed captively in production of grey cotton fabrics. Such yarn constitute a small proportion of the total yarn production, most of which is used in production of dutiable processed fabrics. The yarn used in the processed fabrics is exempted from the duty. Since it was not known at the spindle stage how much of the yarn would be used in grey fabrics and processed fabrics, the duty on yarn used in the grey fabrics has been paid at the time of clearance of grey fabrics.
2. Rule 49A allows a manufacturer to defer payment of yarn duty to the stage of clearance of fabrics, and it also stipulates payment of interest at the rate prescribed in the said rule. However, for availing of the procedure under Rule 49A, a manufacturer has to make an application to the Commissioner and he can follow the procedure under Rule 49A only after the Commissioner grants the application. The appellants have admittedly not applied for availing the procedure under Rule 49A and hence the question of their application being granted has not arisen. Therefore, the issue is whether in such circumstances the department is justified in charging the interest from the appellants under Rule 49A.
3. The way Rule 49A is worded, it is clear that the procedure under the same is optional and conditional upon the manufacturer applying for it and his application being granted by the Commissioner. Since the appellants have not applied for the procedure, the provision of the said rule can not be applied to them. Therefore, the demand of interest at the rate prescribed under Rule 49A and the imposition of penalty on the appellants can not be sustained. If it is the intention of the law makers that Rule 49A should be compulsorily applied to all manufacturers who are not able to pay duty on yarn at the spindle stage, then it should not have been made conditional upon the manufacturer applying for it and the Commissioner allowing the application. Since the present appellant has not applied for availing the procedure under Rule 49A, it: was open to the department to collect the duty from the appellants at the spindle stage but it was not open to demand interest under Rule 49A since the appellants had not opted for the procedure under the said Rule. There are provisions for charging interest on delayed payment of duty under Section 11AA and Section 11AB but I find that neither these provisions have been invoked nor their applicability in this case has been examined by the department.
4. In view of my finding as above, the impugned orders are set aside and the appeals are allowed with consequential benefit to the appellants.
(Pronounced in Court)