1987 (6) TMI 48 - HC - Central Excise

Summary

Issues:
Classification of doubled yarn for excise duty under Tariff Item No. 18-lll(ii), Show cause notices issued by the excise department, Whether doubling of yarn creates a new product, Compliance with formal process before filing a petition.

Analysis:
1. The petitioners, who manufacture two types of spun yarns, were paying duty on these yarns under different tariff items. The excise department issued show cause notices alleging that by doubling the yarn, the petitioners were manufacturing a new product that should be classified differently for excise duty.

2. The department demanded that the doubled yarn be classified under Tariff Item No. 18-lll(ii) and pay excise duty at that rate. The petitioners argued that doubled yarn is not a new product and referred to legal precedents to support their position. Despite the petitioners' submissions, the department persisted in its demand through multiple show cause notices.

3. The department's stance was influenced by a previous order in a similar matter where the Collector of Central Excise held that doubled yarn constitutes a new product. However, a judgment in a different case had ruled that doubling yarn does not create a new product. The court in the present case applied the reasoning from the latter judgment and concluded that no new product emerges from doubling yarn.

4. The court held that the petitioners were not required to go through the formal process of being heard by the Collector of Central Excise before filing the petition. The show cause notices were deemed not maintainable, rendering the department's actions unauthorized. Consequently, all show cause notices were quashed, and any related bank guarantees and personal bonds were discharged.

5. The court also stayed the portion of the order related to bank guarantees and bonds for four weeks and directed the respondents to pay the costs of the petition to the petitioners. Overall, the judgment favored the petitioners' position regarding the classification of doubled yarn for excise duty.