1992 (1) TMI 127 - SC - Central Excise

Whether the categories of yarn referred to earlier manufactured by the assessee could be brought within the terms of Tariff Item No. 18B(ii)? Held that - The contention urged on behalf of the appellant has to be accepted. Items 18 to 181 form one group of entries dealing with composite yarn of various categories. Item 18A defines cotton yarn as yarn in which cotton predominates in weight. Item 18B talks about woollen and acrylic spun yarn as yarn in which wool or acrylic fibre or both predominates or predominate in weight. Item 18C deals with silk yarn in which silk predominates in weight and so on. The word predominate in the context of a composite yarn made of different types of yarns has a very simple meaning namely that the percentage of the particular yarn with which one is concerned should predominate over the weight of the other constituents of the composite yarn. This being so we are unable to agree with the reasoning of the Appellate Tribunal so far as the items of composite yarn which which we are concerned. We hold that they fall under Item 18B(ii) and that the duty should be levied accordingly. Appeal allowed.

Summary

Issues:
Interpretation of Tariff Item No. 18B(ii) - Whether the composite yarn manufactured by the assessee falls within the terms of Tariff Item No. 18B(ii).

Analysis:

The case involved two appeals by the Union of India concerning the order of the Central Excise and Gold (Control) Appellate Tribunal in the matter of a company manufacturing various types of yarn. The composite yarns in question contained polyester, viscose, and acrylic fibers in different proportions. The first issue considered was whether the composite yarn could be treated as a separate item of goods for levying excise duty. This issue was resolved in favor of the Revenue based on a previous decision of the court.

The second and primary issue before the Supreme Court was the interpretation of Tariff Item No. 18B(ii) to determine if the categories of yarn manufactured by the assessee fell within its ambit. The Tariff Entry specified that the yarn should contain more than one-sixth by weight of non-cellulosic fiber (other than acrylic fiber) calculated on the total fiber content. The Tribunal had set a threshold of 50% weight for a fiber to be considered as predominating. However, the appellant argued that since acrylic fiber constituted 50% of the yarn's weight compared to other fibers at 24% and 26%, or 45% and 5%, acrylic fiber should be deemed to predominate in weight.

After careful consideration, the Court held that the interpretation adopted by the Tribunal was incorrect. The Court elucidated that the Tariff Items differentiated various composite yarns based on the predominance of specific fibers in weight. The Court emphasized that the term "predominate" in the context of composite yarn meant that the percentage of a particular fiber should exceed that of the other constituents. The Court rejected the Tribunal's 50% threshold, stating that the comparison should be made between the different types of yarn in the composite fabric. Therefore, the Court concluded that the yarns in question fell under Item 18B(ii) and directed the levy of duty accordingly.

As a result of the Court's decision on the primary issue, the other questions discussed by the Tribunal became irrelevant, and the appeals by the Union of India were allowed with no order as to costs.