1983 (9) TMI 293 - AT - Central Excise

Summary

Issues Involved:
1. Liability of central excise duty at multiple stages of yarn manufacture.
2. Definition and classification of the final product as "multiple fold yarn".
3. Applicability of Tariff Item 18E versus Item 68.
4. Entitlement to refund of duty paid on the final product.

Detailed Analysis:

1. Liability of Central Excise Duty at Multiple Stages of Yarn Manufacture:
The proceedings originated from a show cause notice issued on 29-7-1976, questioning why central excise duty was not paid at all three stages of yarn manufacture: (i) cotton yarn, (ii) staple yarn, and (iii) the process of twisting or doubling these yarns into a multiple fold yarn. The Department's view was that excise duty was payable on each constituent yarn separately and on the final multiple fold yarn. The appellant had cleared the final product by paying duty only at the third stage, under Tariff Item 18E, and availed of an exemption under Notification No. 30/75-C.E., dated 1-3-1975.

2. Definition and Classification of the Final Product as "Multiple Fold Yarn":
The appellant contended that they had not produced any multiple fold yarn but only doubled single thread yarns, which they argued did not constitute manufacture. They claimed that the process of doubling already manufactured yarns did not attract further duty and sought a refund of the duty already paid on the doubled yarn. The Assistant Collector confirmed the Department's view, holding that the process involved three different stages, attracting three different tariff items. He noted that the final product, a combination of cotton and staple yarn, was a new product falling under T.I. 18E.

3. Applicability of Tariff Item 18E versus Item 68:
The appellant argued that the final product could not be classified under T.I. 18E, as the term "yarn" implied spinning from fiber, which was not involved in the process of doubling. They suggested that the final product should fall under the residuary Item 68. The Appellate Collector rejected this argument, citing a Gujarat High Court ruling that excise duty could be levied on goods undergoing transformation at different stages. The Tribunal held that T.I. 18E, as it existed at the relevant time, covered all varieties of yarn not specified elsewhere, without restricting it to "spun" yarn. The Tribunal found no merit in the appellant's contention that the final product should be classified under Item 68, emphasizing that T.I. 18E was more specific.

4. Entitlement to Refund of Duty Paid on the Final Product:
The appellant sought a refund of the duty paid on the final product, arguing that if duty was to be levied on the constituent yarns, the duty already paid on the doubled yarn should be refunded. The Tribunal noted that the appellant had classified the final product under T.I. 18E and paid duty accordingly. The Tribunal rejected the appellant's claim for a refund, holding that the final product was correctly classified under T.I. 18E, and the duty paid at the third stage did not negate the liability for duty on the constituent yarns.

Conclusion:
The Tribunal upheld the Department's view that central excise duty was payable at all three stages of yarn manufacture. It confirmed that the final product, classified as "multiple yarn," fell under T.I. 18E and not Item 68. The appellant's claim for a refund of duty paid on the final product was rejected, and the appeal was dismissed.