ORDER
Lajja Ram, Member (T)
1. In this appeal filed by M/s. Malwa Cotton Spinning Mills Ltd., Ludhiana the benefit of Notification No. 53/87-C.E., dated 1-3-1987 on the stocks of viscose staple fibre lying in stock as on 1-3-1989 with the appellants when the aforesaid Notification No. 53/87-C.E. was amended vide Notification No. 53/87-C.E., dated 1-3-1990 (sic) was denied. Under Notification No. 53/87-C.E., dated 1-3-1987, as amended, concessional rate of excise duty was prescribed in favour of artificial staple fibre and tow classifiable under sub-heading 5202.00 subject to the following conditions :-
(i) sudi artificial staple fibre and tow was to be used for blending with cotton in the manufacture of cotton yarn falling under Heading No. 52t03;
(ii) if the use of artificial staple fibre and tow was elsewhere than in the factory of production of such artificial staple fibre and tow then the procedure as set-out in Chapter X of the Central Excise Rules, 1944 was followed.
The appellants were availing the benefit of this Notification. On 1-3-1989 by amending. Notification No. 55/89-C.E. this benefit of concessional rate of duty in favour of artificial staple fibre and tow was withdrawn. On that date the appellants were having stocks of artificial staple fibre and tow which prior to that date i.e., 1-3-1989 had not been used in the manufacture of the cotton yarn falling under Heading No. 52.03 Central Excise duty at appropriate rate was demanded in respect of such stocks.
2. We have heard Shri P.R. Tondon, ld. Consultant. He submitted that after 1-3-1989 the artificial staple fibre tow which have been received by them under Chapter X Procedure had been used in the manufacture of cotton yarn falling under Heading No. 52.03. There is no dispute that as on 1-3-1989 when the benefit of concessional rate of duty applicable to artificial staple fibre and tow had been withdrawn, the appellants had stocks which had not been used for blending with cotton. It was his submission that subsequently they have used this artificial staple fibre in the manufacture of cotton yarn and to that extent they have complied with the terms of exemption Notification No. 53/86-C.E. He also referred to the Tribunal decision in the case of C.C.E. v. Swan Mills Ltd. -1991 (54) E.L.T. 131 (Tribunal).
3. In reply Shri Satnam Singh, ld. SDR, reiterated the ground on which the demand has been confirmed by the Assistant Collector of Central Excise, Patiala, whose orders have been confirmed by the Collector of Central Excise (Appeals), Chandigarh. He referred to the provisions of Chapter X of the Central Excise Rules, 1944 and submitted that the goods which were not utilised prior to the date of the withdrawal of the concession were in the nature of the surplus goods and duty had been correctly confirmed in respect of such stocks.
4. We have carefully considered the matter. The benefit of concessional rate of duty in favour of artificial staple fibre and tow under exemption Notification No. 53/87-C.E., dated 1-3-1987 (as amended) was conditional. The benefit was subject to the two conditions which have already been summerised above. It was a necessary condition that the artificial staple fibre and tow received under concessional rate of duty was used for blending with cotton for the manufacture of cotton yarn which was to be classified under Heading No. 52.03 of the Tariff. There is no dispute that as on 1-3-1989 the artificial staple fibre and tow received under concessional rate of duty had not been used for the purpose for which it was received. The ld. Counsel had submitted that subsequently they have used such fibre in the manufacture of requisite type of cotton yarn. We consider that once the benefit had been withdrawn with effect from 1-3-1989 the subsequent use is of no avail.
5. The goods had been received under the procedure set out in the Chapter X of the Central Excise Rules, 1944. Chapter X procedure of the Rules prescribed a detailed procedure to be followed by the person wishing to obtain remission of duty on such goods. The person wishing to obtain the remission of duty is required to apply to the Proper Officer in Form AL-6 and the Proper Officer had to grant licence to such person in Form L-6. The person concerned was required to execute a Bond in Form B-8. The goods were required to be removed from the factory of manufacture under the authority of CT-2 certificate to be issued by the Proper Officer at the place of intended receipt. There are a number of other conditions to ensure that the goods received under Chapter X procedure are used for intended purpose and in case the provisions are not followed then the duty is recoverable from the L-6 licencee. Under the scheme of Chapter X of the Rules the liability in case the condition under which the goods were received on concessional rate of duty are not fulfilled-is cast on the L-6 Licencee who used the goods.
6. The duty involved in these proceedings is Rs. 23,119.55.
7. The ld. Counsel had relied upon the Tribunal decision in the case of Collector of Central Excise v. Swan Mills Ltd. -1991 (54) E.L.T. 131 (Tribunal). In that case the matter related to the captive use of yarn by composite textile mills in the manufacture of cotton fabrics. The cotton yarn when captively used by the composite mills in the manufacture of cotton fabrics enjoyed exemption from duty. This Notification granting exemption from duty in favour of cotton yarn was withdrawn on 14/15-7-1977. On that date the respondents in that case were having some stocks of cotton fabrics in which exempted cotton yarn had been used. The Tribunal had observed that when the cotton yarn was removed from the Spinning Section to the Weaving Section there was a valid exemption in favour of cotton yarn. Further, the fabrics had been manufactured prior to the date of withdrawal of concession from cotton yarn on 14/15-7-1977. Para 4 of that decision is extracted below :-
“4. Removal of yarn in a composite mill for the purpose of captive consumption in the manufacture of fabrics in the same factory at the spindle stage is removal for the purposes of Rules 9 and 49 of the Central Excise Rules, 1944. These two rules were amended retrospectively by Section 51 of the Finance Act, 1982 which gave retrospective effect to the Central Excise Notification No. 20/82-C.E., dated 20-2-1982. In the case of J.K. Spinning & Weaving Mills Ltd. and Anr. v. Union of India and Ors., reported in 1987 (32) E.L.T. 234 (S.C.), the Hon’ble Supreme Court held that the aforesaid amendment of the rules with retrospective effect was valid. In M/s. Wallace Flour Mills Co. Ltd. v. Collector of Central Excise, reported in 1989 (44) E.L.T. 595 (S.C.), the Hon’ble Supreme Court held that the rate of duty prevalent on the date of removal of the excisable goods is the rate applicable under Rule 9A of the Central Excise Rules. In the present case, the yarn was removed from the spinning section to the weaving section of the respondents’ mill and used in the manufacture of cotton fabrics prior to 14/15-7-1977. The duty at the rate prevailing on the dates of removal of the yarn from the spinning section to the weaving section are the dates of removal of the yarn for the purposes of Rules 9 and 49 of the Central Excise Rules. Prior to 15-7-1977 the yarn was fully exempted from duty under Notification No. 132/77-C.E., dated 18-6-1977. In the circumstances, Central Excise Duty was not payable on the yarn in dispute. We, therefore, uphold the impugned order and dismiss the appeal of the Revenue with consequential refund of duty to the respondents.”
8. We do not consider that the facts in the present case are similar to the one which was before the Tribunal in the case of C.C.E. v. Swan Mills Ltd.
9. Taking all the relevant facts and consideration into account, we do not find any merit and the appeal is rejected.