1988 (5) TMI 117 - AT - Central Excise

Summary

Issues Involved:
1. Classification of the product under the correct Tariff Item.
2. Duty liability on the conversion of single yarn into fancy yarn.

Issue-wise Detailed Analysis:

1. Classification of the Product under the Correct Tariff Item:

The appellants manufacture viscose staple fibre yarn and classify it under Tariff Item 18-III(i). They argue that twisting the yarn to make multiple fold yarn does not change its classification. The Tribunal referenced Order No. 132/87-D, which supported the appellants' stance, stating that the resultant fancy yarn produced by twisting strands of yarn would still fall under Tariff Item 18-III CET and not under Tariff Item 68-CET. The Tribunal also cited the India Jute Company Ltd. case, which held that the product remains under Tariff Item 18-III-CET even after twisting. The Tribunal concluded that the final product, fancy yarn, is classifiable under Tariff Item 18-III(i).

2. Duty Liability on the Conversion of Single Yarn into Fancy Yarn:

The department argued that the process of twisting the yarn results in a new product, thus attracting fresh duty. They cited the Supreme Court decision in Empire Industries Ltd. v. Union of India and the Tribunal decision in Guardian Plasticote Ltd., which established that the emergence of a new product through manufacturing processes attracts duty. The Tribunal noted that fancy yarn, although classifiable under the same Tariff Item 18-III(i), is a new product with a distinct market and use, thus manufacturing has taken place, attracting further duty. However, the Tribunal also referenced the Orissa Weaver's Cooperative Spinning Mills case, which clarified that multiple fold yarn remains the same commodity as single yarn under the same Tariff Item. Despite this, the Tribunal held that the emergence of a new product (fancy yarn) still attracts duty under the same Tariff Item 18-III(i).

Separate Judgments Delivered by Judges:

- K. Prakash Anand, Member (T): Concluded that the product is classifiable under Tariff Item 18-III(i) and that duty is payable again on the conversion of single yarn into fancy yarn under the same Tariff Item.

- V.T. Raghavachari, Member (J): Agreed with the classification under Item 18-III(i) but disagreed with the conclusion regarding fresh duty liability. He argued that since Item 18-III is not an "all sorts" entry, the resultant product would not become liable for duty again.

Final Order:
The appeal is allowed, the orders of the lower authorities are set aside, and the classification of the product is ordered under Item 18-III(i) CET.