2001 (4) TMI 262 - AT - Central Excise

Summary

Issues:
1. Inclusion of cost of sizing yarn in assessable value for duty calculation.

Analysis:
In the present case, the main issue revolves around the inclusion of the cost of sizing yarn in the assessable value for duty calculation. The appeals were filed by two separate entities, Century Textiles & Industries Ltd. and Shyamprakash Spinning Mills Ltd., challenging the orders of the Commissioner (Appeals) regarding the calculation of the value of yarn captively consumed in weaving fabrics.

Century Textiles' Appeal:
Century Textiles, engaged in spinning cotton yarn, contested the orders that considered the value of the sized yarn, post-sizing, for duty calculation instead of the value of the yarn before sizing. The judicial history, particularly the Delhi High Court's decision in J.K. Spinning & Weaving Mills, emphasized that sizing is not a manufacturing process that changes the nature of the yarn. The duty was to be levied on unsized yarn, ignoring the weight of sizing added. The absence of sizing as a specified process during the relevant period further supported this interpretation.

Shyamprakash Spinning Mills' Appeal:
Shyamprakash Spinning Mills, manufacturing synthetic yarn, faced duty demands for yarn cleared for home consumption without including the cost of sizing. The appellant argued that duty on unsized yarn for captive consumption should also apply to home consumption. The Bombay High Court's judgment in Union of India v. Swan Mills Ltd. supported the view that duty should be levied on the weight of unsized yarn, not sized yarn.

Legal Interpretation:
The Tribunal analyzed various precedents and legal provisions to determine the assessable value for duty calculation. The assessment basis under Section 4 of the Act focuses on the sale price of the final product. The judgment in C.C.E. v. Dawn Mills Co. Ltd. affirmed that duty on yarn should consider the weight of unsized yarn. However, in cases where duty is ad valorem, the price at which goods are sold becomes crucial, irrespective of whether sizing constitutes a manufacturing process. The Supreme Court's decision in Siddhartha Tubes Ltd. v. C.C.E. supported including additional processes' costs in the assessable value.

Conclusion:
Ultimately, the appeals by Century Textiles and Shyamprakash Spinning Mills were allowed, emphasizing the duty calculation on the value of unsized yarn. The judgment provided clarity on duty assessment concerning the inclusion of sizing costs, aligning with past legal interpretations and precedents. Appeals 259/96 and 1076/96 were dismissed, maintaining consistency in duty calculation principles.