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Rate of duty leviable on partially oriented yarn of 132 denierage at the time of clearance from the factory gate. Analysis: The petition filed under Articles 226 and 227 of the Constitution raised the issue of the rate of duty leviable on partially oriented yarn of 132 denierage at the time of clearance from the factory gate. The petitioners, a public limited company manufacturing polyester filament yarn, challenged the finalisation of provisional assessment by the Superintendent, Central Excise, for the period from December 31, 1982, to February 27, 1983. The petitioners contended that the excise duty levied was erroneous as it was based on the duty prescribed for texturised yarn, whereas the base yarn cleared from the factory gate should be subject to a different duty rate. The Central Government's exemption notifications and tariff entries clearly distinguished between textured yarn and non-textured yarn, indicating separate duty rates for each category. The petitioners argued that excise duty is payable as soon as base yarn comes into existence and is cleared from the factory gate, and it is impermissible for the department to levy a higher duty applicable to texturised yarn at that stage. The Court analyzed the submissions made by both parties and found merit in the petitioners' argument that the excise duty payable on base yarn cleared from the factory gate should be based on the rate applicable to base yarn and not on the rate for texturised yarn. The Court rejected the department's contention that the duty payable on base yarn should be calculated as if it were for texturised yarn, emphasizing that base yarn is a distinct excisable product liable to duty as soon as it is manufactured and cleared from the factory gate. The Court highlighted that the liability to pay duty arises when base yarn comes into existence and is not dependent on the subsequent texturising process to create texturised yarn. The Court also dismissed the department's reliance on a circular and a decision of CEGAT, asserting that the duty on base yarn cannot be levied based on the assumption that it will be used for manufacturing texturised yarn. Ultimately, the Court made the rule absolute in favor of the petitioners, granting the relief sought in the prayers amended in the petition. The Court held that the department's action in finalizing the provisional assessment based on the duty rate for texturised yarn was erroneous, and the petitioners were entitled to the relief sought. No costs were awarded in the circumstances of the case.
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