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TMI Blog2005 (1) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... consumption in manufacture of the fabrics. 3. Revenue also contends that if yarn is taken out for winding and warping in another factory after paying duty at the spindle stage, no further duty in the second factory will be leviable in view of exemption under Notification No. 5/99 which exempts yarn, subjected to warping, winding and other processes, on which duty of excise has been paid. This facility, according to Revenue, cannot be availed by a composite mill captively consuming yarn for manufacture of fabrics since the deemed clearance occurs after warping and winding before consumption in the manufacture of fabrics and duty on yarn is paid at the fabrics stage. 4. Shri Gajendra Jain, learned C.A. appearing on behalf of the respondents states that in a similar case, another Bench has decided that since processes after spindle stage were exempt from duty, inclusion of the cost of warping etc. cannot find a place in the value of yarn which is fully manufactured at the spindle stage. The order passed by the said Bench in the case of Maheshwari Mills v. C.C.E., Ahmedabad - 2004 (165) E.L.T. 246 (Tribunal), bearing No. 73l-35/03-ND(A) dtd. 17-12-2003 also expresses the view that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brics, applying the ratio of the aforesaid two Apex Court decisions, the value of yarn for the purpose of duty at the stage of such deemed removal has to include the cost of warping and winding. In the case of yarn, the stage at which it is taken for captive consumption and which is defined to be the stage of removal from the factory, the yarn has been subjected to the processes of warping and winding. Even though such processes will not attract further duty if subjected in another factory on duty paid yarn, in the composite Mill, the cost of such processes has to be included in the value of yarn following the aforecited Apex Court decisions. Same will be the case in respect of such processed yarn which is cleared from an integrated factory on payment of duty, though the actual method of valuation need not be based on cost but on the actual sale price. 5. We also find that in the case of Maheshwari Mills Ltd. (supra) reliance was placed on the decisions of the Apex Court rendered in the case of C.C.E., Hyderabad v. Divya Enterprises - 2003 (153) E.L.T. 497 (S.C.) and in the case of Bhilwara Synthetics Ltd. v. C.C.E. - 2002 (143) E.L.T. 22 (S.C.) to come to a conclusion that cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is removed outside the spinning section for purpose of consumption for weaving inside the mill; that winding and warping process are subsequent to removal of yarn and are processes preparatory to weaving and therefore, cost of winding and warping are not includable in the cost of yarn. He has observed that manufacture of yarn is fully completed in the spinning section and therefore, cost components relevant only up to that stage are includible in the assessable value. Cost of the subsequent processes like warping and winding will get reflected in the price of the fabric. 9. As against the above finding of Commissioner (Appeals), the revenue, in their grounds of appeal, has contended that in terms of Chapter Note 1 to Chapter 52 and Chapter Note 3 of Chapter 55, any process carried on yarn will amount to manufacture and as such, yarn can be termed as fully manufactured only after the process of warping and winding. They have further contended that though the process of warping and weaving are exempted under Notification No. 5/99-C.E. if manufactured out of duty paid yarn, the said notification will not apply in case of composite mill. 10. After considering the above grounds and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order :- We are of the opinion that the decision in Siddhartha Steel Tubes case and J. G. Glass Inds. are not applicable to the present case. In those cases, goods liable to duty were steel tubes and glass. Question arose as to whether cost of galvanization of tubes done outside the factory of production was liable to be included in the assessable value and also whether process of galvanization attracted duty, since galvanizing by itself was not a process of manufacture. Similarly, in the case where glass was manufactured in one unit and cleared to another premises for decoration, the question arose as to whether the cost of decoration was required to be included in the assessable value. The Apex Court held that cost of processes including the processes incidental to manufacture carried out by a manufacturer before the removal of the goods were liable to be included in the assessable value. In both these cases, there was no exemption in favour of the galvanization of steel tubes or decoration of glass. The present case is different, inasmuch as processes after spindle stage was exempt from central excise duty and yarn had been fully manufactured at the spindle stage. Thus, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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