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Issues:
1. Classification of twisted yarn for excise duty under Tariff Item 18E. 2. Interpretation of "manufacture" for excise duty liability. Analysis: 1. The case involved a dispute regarding the classification of twisted yarn for excise duty under Tariff Item 18E. The respondent, a company manufacturing yarn, produced cotton/nylon duck by twisting cotton and nylon yarns. The Assistant Collector reclassified the twisted yarn under Item 18E, leading to a show cause notice for non-payment of duty. The respondent challenged this classification through a writ petition seeking relief from the levy. 2. The respondent argued that twisted yarn does not fall under Tariff Item 18E as it is not a result of a manufacturing process. The respondent contended that unless a product is a result of manufacture, it cannot be subject to excise duty. The court considered precedents emphasizing that excise duty is applicable only to products resulting from manufacturing. The court noted that the excise authorities did not assess whether twisted yarn qualifies as a manufactured product. The court agreed with the respondent's argument that Tariff Item 18E is a residuary entry covering spun yarn, not a mixture of cotton and nylon yarn already subjected to excise duty. 3. The court held that the show cause notice proposing action against the respondent for non-payment of duty on twisted yarn should be quashed. The appellant was directed to review the liability for excise duty on twisted yarn within two months. The court upheld the decision to quash the show cause notice but made the refund of excise duty subject to the appellant's review of the liability under Tariff 18E. The writ appeal was allowed with no order as to costs, maintaining the relief granted to the respondent.
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