COLLECTOR OF CENTRAL EXCISE, JAIPUR v. BANSWARA SYNTEX LTD. NOVEMBER 26, 1996 [A.M. AHMADI, CJ., J.S. VERMA AND B.N. KIRPAL, JJ.] Central Excises and Salt Act, 1944-Section }-Central Excise Rules, 1944-First Schedule, Tariff Item No. 18–Yam-Whether a single ply yam is liable to excise duty-HELD, the liability to pay excise duty arises at the time C of manufacture of single ply yam and not after the same has been doubled or multifolded.
The Superintendent of Central Excise issned a demand notice to the Respondent-Company to pay excise duty for single ply yarn used to dou- bling process without pa)ment of duty. The company filed reply to the D Assistant Collector, Central Excise, who had confirmed the demand notice issued by the Superintendent. Aggrieved by this order, Respondent-com- pany filed an appeal before the Collector [Appeals] who set aside the Assistant Collector's order by holding that the duty was chargeable at the stage of doubling or multifolding.
Against this order, Appellant-Collector of Central Excise filed an appeal before the Customs, Excise and Gold [Control] Appellate Tribunal, which was dismissed. Hence this appeal by the Appellant-Collector of Central Excise.
On behalf of the appellant, it was contended that the liability to pay excise duty arises at the time single ply yarn was manufactured and dou- bling or multifolding of the single ply yarn does not bring into existence an excisable item and single ply yarn would be subject to duty upon its manufacture.
Allowing this appeal, this Court HELD : 1.1. A single ply yarn is first manufactured and thereafter it is doubled or multifolded depending upon the type of fabric which is ul- timately to be woven. The liability to pay excise duty would arise on the manufacture of the single ply yarn and not after the same has been doubled H or multifolded. Doubling or multifolding of the same yarn does not bring COllECTOROFCENfRALEXCJSEv. BANSWARASYNIBXLID.[KIRPAL,J.]195 into existence a new product and no duty is leviable at that stage. [197-E-F] A J.K Spinning and Weaving Mills Ltd. andAnr. v. U.O.I., (1987) 32 ELT 23 S.C. relied on.
2. The liability to pay excise duty arises at the first stage itself, namely at the time of manufacture of single ply yarn. This being so the B demand raised by the Assistant Collector is not invalid. [198-F] Bhilwara Spinners Ltd. v. Collector of Central Excise, (1996) 82 ELT S.C. 442 referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6622 of C i995. From the Order dated 11.6.92 of the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi in Appeal No. E/1767/85-D & E/Co/419/91-D.(Order No. E/247/92-D.
With Ci\il Appeal No. 1778 of 1987. M.S. Usgaonkar, Additional Solicitor General, V.K. Verma and A Sobba Rao for the Appellant. DA Dave, Ms. Ruby Ahuja for Ms. M. Karanjawala for Respondent. The Judgment of the Court was delivered by
KIRPAL, J. The respondent company is engaged in the manufacture of yarn falling under tariff item no. 18, 18B and 18E of the Central Excise Tariff. It manufactures single ply yarn and it also, in the course of its manufacturing process, ~oes doubling and multifolding of the yarn. The respondent was paying excise duty, in case of doubled or multi- folded yarn, on the weight of doubled or multifolded yarn and no excise G duty was being paid on the single yarn which was being used for doubling or multifolding. A show cause notice dated 4th September, 1982 was issued by the Superintendent of Central Excise asking the respondent to pay a sum of Rs. 35,190.96 as central excise duty which had been short paid during the year 1978-79 on the ground that it had utilised 4,56,456.10 Kgs. of single ply yarn for doubling process without payment of duty. The respondent filed its reply dated 10th September, 1982, inter alia, contending that there had neither been any removal nor any utilisation of the yarn resulting in the production of a new commodity and, therefore, duty had been paid correctly at the time of removal after doublingimulti- folding of the yarn.
It appears that when the single ply yarn is doubled or multifolded there is some wastage. If duty is paid on the production of single ply yarn the respondent would not get the benefit of exclusion of the waste which arises when that single ply yarn is used in the process of doublingimulti- folding. That is why the respondent chose to pay duty after the process of C doubling or multifolding had been completed. The Assistant Collector, Central Excise vide his adjudication order dated 27th September, 1982 confirmed the demand raised in the show cause notice by coming to the conclusion that the yarn at its spindle stage, after it had been spun, was a fully manufactured product and duty was payable at that stage. Being aggrieved by the order of the Assistant Collector the respon- dent filed an appeal to the Collector (Appeals) who, vide his order dated 27th March, 1985, set aside the impugned order by holding that the duty was chargeable at the doublingimultifolding stage.
The appellant then filed an appeal before the Customs, Excise and Gold (Control) Appellate Tribunal contending that the single lJIY yarn had to be subjected to duty and by paying duty on the weight of the doubled yarn the respondent had avoided payment of the duty on the waste which was generated in the doubling of the yarn. The Tribunal, however, dis- missed the appeal of the appellant.
In the present appeal it is contended on behalf of the appellant that the duty was payable when the single ply yarn was manufactured. It is not in dispute that at the stage of the manufacture of the single ply yarn, there comes into existence an excisable item. The respondent manufactures G single ply yarn and it is only thereafter, if required by its customers, that the said yarn is doubled or multifolded, as the need arises. Mere doubling or multifolding of the single yarn which is manufactured does not bring into existence a new product. The single yarn which is manufactured is an excisable item and would be subject to duty upon its manufacture. It is immaterial, in view of Rule 9 (1) of the Central Excise Rules COLLECTOR OF CENfRAL1iXCJSE v. BANSW ARA SYNfEX LID. [KIRPAL, J.I 197 and Section 49 of the Act whether the yarn so manufactured is captively A consumed or is subjected to any other or further process. Reference may be made to J.K. Spinning and Weaving Mill Ltd. and Anr. v. Union of India and 01'. [1987] 32 ELT 234 SC where Rules 9 and 49 of the Central Excise Rules, 1944, after they were amended with retrospective effect by Section 51 of the Finance Act, 1982 came up for interpretation. It was held that "in view of the deeming provisions under Explanation to Rules 9 and 49. although the goods which are produced or manufactured at an inter- mediate stage and, thereafter, consumed or utilised in the integrated process for the manufacture of an<·,ther commodity is not actually removed, shall be construed and regarded as removed." \lealing with the question of conversion of unsized yarn into sized yarn it ·. lS observed at page 250 as C follows:-
"In our view, the High Court by the -impugned judgment has rightly held that the appellants are not liable to pay any excise duty on the yarn after it is sized for the purpose of weaving the same into fabrics. No distinction can be made between unsized yarn and sized D yarn, for the unsized yarn when converted into sized yarn does not lose its character as yarn.
The same principle would be applicable in the present case. A single ply yarn is first manufactured and thereafter it is doubled or multifolded, depending upon the type of fabric which is ultimately to be woven. The liability to pay excise duty would arise on the manufacture of the single ply yarn and not after the same has been doubled or multifolded. Doubling or multifolding of the same yarn does not bring into existence a new product and no duty is leviable at that stage.
Learned counsel for the respondent sought to place reliance on the decision of this court in Bhilwara Spinners Ltd. v.Collector of Central Excise (1996) 82 ELT SC 442, in support of his contention that the respondent was liable to pay duty on the doubled yarn and no duty ought to be levied on the single yarn. In our opinion this judgment can be of little assistance G to the respondents.
In Bhilwara Spinners case the company was engaged in the manufac- ture of fabrics. For that purpose it manufactured four types of yarns. The yarn when produced was a single yarn but the appellant doubled and multifolded the yarn as a step towards manufacture of fabrics. The H A appellant's case was that it had been paying duty on doubled or multifolded yarn but not on single yarn. When called upon by the Excise l)epartment to show cause why duty should not be levied on the single yarn; the contention of the appellant therein was that both single st&ge yarn :1.nd doubled/multifolded yarn are one and the same goods and inasmuch as i.t B was paying duty on the doubled/multifolded yarn no duty was payable on the single yarn. The appellate Collector accepted this contention but the Tribunal agreed with the Revenue. This court, in appeal, did not go into the question whether single yarn or doubled/multifolded yarn are one and the same goods and observed as follows:-
c "We are concerned in this case with the only question whether single yarn attracts duty or not. In view of the finding of the Tribunal affirming the finding of the Assistant Collector that single yarn is a completely manufactured product, it cannot be disputed that it attracts duty. We are not concerned with the question whether the doubling!multifolding of the said yarn results in different goods or not and whether duty is leviable on doubled/mul- tifolded yarn. We need only say that the Tribunal is right in its opinion that the single yarn is subject to duty though used in the manufacture of fabrics in a continuous process of manufacture." These observations are not at variance with the decision in J .K Spinning's case (supra). In view of the fact that an excisable item comes into existence with the manufacture of a single ply yarn it becomes liable to pay excise duty at that stage itself. The respondent cannot be allowed to contend that the levy of excise duty is postponed to a point of time when the yarn is removed after doubling or multifolding. The liability to pay F excise duty arises at the first stage itself, namely, at the time of manufacture of single ply yarn. This being so the demand raised by the, Assistant Collector was not invalid.
For the aforesaid reasons the appeals are allowed. The judgment of G the Tribunal is set aside and the decision of the Assistant Collector of Central Excise is restored. Result of this would be that the respondent would be liable to pay the aforesaid amount of Rs. 35,190.96 plus interest at the rate of twelve per cent per annum thereon. The appellant would also be entitled to costs.
P.T.C. Appeals allowed.