Case Note & Summary
The dispute arose between the Collector of Central Excise, Chandigarh, and Decent Dyeing Co. regarding the liability for excise duty on dyed acrylic yarn. The respondent, engaged in dyeing yarn on a job basis, was paying duty at Rs. 10 per kg under Notification No. 125/75-CE, assuming that the base yarn had already incurred duty. A show cause notice was issued demanding Rs. 4,300 as differential duty for the period May to July 1976, which the respondent contested, asserting that the duty on the base yarn was the responsibility of the manufacturers. The Appellate Collector confirmed the demand, but the Appellate Tribunal sided with the respondent, stating that the burden of proof regarding duty payment lay with the revenue. The Tribunal noted that purchasers could reasonably assume that the duty had been paid by the manufacturer, and it was not the respondent's responsibility to prove otherwise. The Supreme Court dismissed the revenue's appeal, affirming the Tribunal's ruling that the excise duty liability rests with the manufacturer, and emphasized the presumption of duty payment in such transactions. The court found no merit in the appeal and dismissed it without costs.
Headnote
A) Central Excise - Duty Liability - Manufacturer's Responsibility - Central Excises and Salt Act, 1944, Section 35L(b) - The court held that the liability to pay excise duty lies with the manufacturer of the base yarn, not the processor, as purchasers can assume duty has been paid. The Tribunal's decision was upheld, emphasizing the need for the revenue to verify duty payment by manufacturers (Paras 434-435).
Issue of Consideration
Whether the respondent was liable to pay differential excise duty on acrylic yarn dyed on job charges.
Final Decision
The Supreme Court dismissed the appeal by the Collector of Central Excise, affirming the Tribunal's decision that the liability for excise duty rests with the manufacturer of the base yarn, not the processor.
Law Points
- Excise duty liability
- Manufacturer's responsibility
- Presumption of duty payment
- Central Excises and Salt Act
- 1944
- Notification No. 125/75-CE
