1984 (1) TMI 219 - AT - Central Excise

Issues Involved:
1. Classification of doubled/twisted yarn.
2. Whether the process of doubling/twisting constitutes "manufacture."
3. Determination of the correct tariff item under which the yarn should be classified.
4. Time-bar on the demands for differential duty.
5. Entitlement to set-off for duty already paid on constituent yarns.

Detailed Analysis:

1. Classification of Doubled/Twisted Yarn:
The appellants, manufacturers of various types of yarn, filed a classification list on 2-5-1978 indicating doubled or twisted yarns as assessable under T.I.68. The Assistant Collector directed that these products be classified under T.I. 18B(ii) and pay duty accordingly. The appellants filed revised classification lists under protest and continued clearance under T.I.68. Notices were issued for differential duty covering May 1978 to March 1979, asserting that the yarns should be classified under T.I. 18B(ii) or 18E depending on the composition.

2. Whether the Process of Doubling/Twisting Constitutes "Manufacture":
The appellants argued that doubling or twisting of duty-paid spun yarns did not amount to manufacture and thus should not attract further excise duty. However, the Assistant Collector and subsequent authorities rejected this contention, holding that the process resulted in a distinct commodity and thus constituted manufacture under Section 2(f) of the Central Excises & Salt Act, 1944.

3. Determination of the Correct Tariff Item:
The Tribunal examined the composition of the yarns and applied the criteria from previous judgments, particularly the case of General Industrial Society Ltd. (1983 (14) E.L.T. 2497). The Tribunal concluded:
- Yarn with polyester/acrylic in the ratio of 50:50 falls under T.I. 18E.
- Yarn with polyester/viscose/acrylic in the ratio of 24:26:50 and 45:5:50 falls under T.I. 68, as they do not meet the predominance test for T.I. 18B or 18E.

4. Time-Bar on the Demands for Differential Duty:
The Tribunal held that the demand for the period May 1978 to September 1978 was barred by time, as the notice for T.I. 18E classification was issued on 6-7-1979, beyond the six months period. For the period October 1978 to March 1979, the demand was valid only from 5-1-1979 onwards, as the extended time limit of five years under Rule 10(1)(a) was not applicable. The Tribunal found no suppression or misstatement by the appellants, thus limiting the enforceable period to six months.

5. Entitlement to Set-Off for Duty Already Paid:
The Tribunal allowed the appellants to set off the duty already paid on the constituent yarns under the same tariff entry, T.I. 18E, in line with the decision in General Industrial Society Ltd. (1983 (14) E.L.T. 2497).

Conclusion:
- Appeal No. ED(SB)(T) 940/83-D: The demand was wholly set aside as it was time-barred and duty had been paid under T.I. 68.
- Appeal No. ED(SB)(T) 1482/83-D: The demand was confirmed only for the period from 5-1-1979 under T.I. 18E for yarn with polyester/acrylic in the ratio of 50:50. Other demands were set aside as duty had been paid under T.I. 68.
- Cross Objection No. ED/SB(CO) 82/83-D filed by the Department was rejected as not pressed.

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