1982 (2) TMI 310 - CGOVT - Central Excise

Summary

Issues:
1. Whether the petitioners were liable to pay Central Excise duty on dyed/processed worsted woollen yarn.
2. Whether Notification No. 236 of 1976 applies to the petitioners' case.
3. Whether the definition of "manufacture" under Central Excise law includes dyeing of woollen yarn.
4. Whether the duty paid at the grey stage exempts the yarn from further duty upon processing.

Analysis:

1. The petitioners were engaged in dyeing/processing worsted woollen yarn without obtaining a Central Excise license and cleared yarn without paying duty. The Assistant Collector held that duty became leviable under Item 18B of the Central Excise Tariff upon processing/dyeing, and the petitioners failed to apply for proforma credit, leading to a confirmed duty demand. The appeal was rejected due to lack of proof of duty payment on the grey yarn.

2. In the revision application, the petitioners argued that dyed yarn was not distinct from grey yarn under Item 18B, and Notification No. 236 of 1976 did not apply. They contended that the dyed yarn should not be liable for further duty as it remained worsted woollen yarn throughout the process. They also claimed that evidence of duty payment was overlooked in the appellate order.

3. The petitioners further argued that the process of dyeing woollen yarn did not fall under the definition of "manufacture" in Central Excise law, unlike fabrics. The Government agreed, stating that dyeing duty paid grey yarn does not create a new commodity, and the duty should only be paid once based on the form in which the yarn is cleared from the factory.

4. Consequently, the Government set aside the order-in-appeal and allowed the revision application, holding that duty paid at the grey stage exempted the yarn from further duty upon processing. The judgment clarified that the duty should only be levied once, depending on the form in which the yarn is cleared from the factory, and dyeing of woollen yarn was not considered a separate manufacturing process under the Central Excise law.