2006 (8) TMI 223 - AT - Central Excise

Summary

Issues:
1. Whether single yarn and double yarn are different excisable goods?
2. Do single yarn and double yarn attract separate excise duty?
3. Is a manufacturing process involved in making double yarn from single yarn?

Analysis:

The issue referred to the Larger Bench was whether single yarn and double yarn are different excisable goods and attract separate excise duty, and if a manufacturing process is involved in making double yarn from single yarn. The Tribunal heard arguments from both parties and referred to the Apex Court's decision in CCE, Jaipur v. Banswara Syntex Ltd. The Supreme Court held that excise duty is leviable on the manufacture of single ply yarn, not after doubling or multifolded, as doubling does not create a new product. The liability to pay excise duty arises at the single yarn stage itself. The Tribunal also discussed the decision in Bhilwara Spinners Ltd., emphasizing that excisable items come into existence with the manufacture of single ply yarn, making them liable for duty at that stage.

In a subsequent Apex Court decision, it was upheld that excise duty is leviable on the manufacture of single ply yarn, not after doubling or multifolded, as doubling does not create a new product. The Tribunal distinguished a case where two different yarns were doubled from the present case where duty paid single ply yarn of the same type is doubled or multifolded. The Tribunal also noted that evidence presented in the Aditya Mills Ltd. case regarding the difference in the market perception of the yarns was not present in the current case. The Tribunal further distinguished another Apex Court decision concerning composite yarn, which was not applicable to the present case.

Regarding the exemption from excise duty for doubled or multifolded yarn, the Tribunal clarified that the mention of an item in an exemption notification does not determine its excisability. The Tribunal referred to previous cases to emphasize that duty can only be levied when a new commercial entity emerges, meeting the tests of manufacture and marketability. The Tribunal concluded by answering the reference in the negative, favoring the assessees and against the Revenue.