Removal of cops/cones etc. under Rule 96E for conversion into Hank Yarn - Instruction - Regarding - Central Excise - 72/88-CX.6

Removal of cops/cones etc. under Rule 96E for conversion into Hank Yarn - Instruction - Regarding Circular No. 72/88-CX.6 Dated 4-10-1988 [From F. No. 212/13/88-CX.6] Government of India Ministry of Finance (Department of Revenue) New Delhi Subject : Removal of cops/cones etc. under Rule 96E for conversion into Hank Yarn - Instruction - Regarding. A number of representations from the Trade and also references from Collectors seeking clarification on the scope of Rule 96E have been received whether cops/cones can be removed for conversion into Hank Yarn without payment of duty. A view has been taken by some Collectors that since conversion of cops/cones to Hank yarn amounts to manufacture, such conversion cannot be allowed without payment of duty under Rule 96E. 2. The issue regarding dutiability of cops/cones before their conversion into Hank Yarn has already become a subject matter of DAP and is being presently deal with in the Board's office in file No. 232/340/84-CX.7. The Auditor General (Audit) has taken the stand that conversion of cops/cones into Hank Yarn amounts to manufacture and since Hank yarn is fully exempt from payment of Central Excise duty under Notification No. 49/85-Central Excises, dated 17-3-1985, duty will have to be discharged at the cops/cones stage before its conversion to Hank yarn. The Ministry has not yet admitted the objection and has requested the Law Ministry to seek the opinion of the learned Attorney General in the matter. 3. It is to be noted that plain reeled hanks are used only by the Handloom sector. The exemption to such hanks is meant to provide relief to this sector. The duty on yarn being specific the relief accruing to plain reeled hank through the exemption would be nullified if duty is collected at the earlier stage of spindle or cones. In other words, the exemption available to hank yarn would become meaningless. Against this background, reference to Law Ministry has been made for seeking the learned Attorney General's opinion regarding liability of duty on yarn on cops/cones captively consumed for manufacture of hank yarn. However as far as scope of Rule 96E is concerned it may be mentioned that cops/cones can be removed without payment of duty for conversion into hanks irrespective of fact whether such conversion amount to manufacture or not. If the process amount to manufacturing then duty on cops/cones would be chargeable in addition to hanks. Facility under Rule 96E for conversion of cops/cones to Hank Yarn has been availed of by the Trade through an established practice over the years. Keeping in view the above position, it has been decided by the Board that removal of cops/cones for conversion into hanks under bond under Rule 96E may be continued. However as a measure of precaution demands may be raised and kept pending till a final decision in the matter is communicated.