Customs, Excise and Gold Tribunal - Mumbai
New Shorrock Mills vs Commissioner Of C. Ex. And Cus. on 3 August, 2006
ORDER
Jyoti Balasundaram, Vice-President
1. The issue referred to the Larger Bench is "Whether single yarn and double yarn both are different excisable goods and attract separate excise duty and whether manufacturing process is involved in making double yarn from single yarn?"
2. We have heard Shri Prakash Shah, learned Counsel for the assessees and Shri V. Sridharan, learned Advocate on behalf of the Bar, and Shri Ajay Saxena, learned SDR for the Revenue.
3. We find that the issue referred stands settled in favour of the assessees by the Apex Court's decision in CCE, Jaipur v. Banswara Syntex Ltd. , holding that "A single ply yarn is first manufactured and thereafter it is doubled or multifolded, depending upon the type of fabric to be woven. The liability to pay excise duty would arise on the manufacture of the single ply yarn and not after the same has been doubled or multifolded. Doubling or multifolding of the same yarn does not bring into existence a new product and no duty is leviable at that stage.' The Supreme Court has decided that the stage of levy of excise duty in such cases is the single yarn stage. The Apex Court has noted its earlier decision in Bhilwara Spinners Ltd. v. CCE and held that "In view of the fact that an excisable item comes into existence with the manufacture of single ply yarn it becomes liable to pay excise duty at that stage itself." The relevant paragraphs of the Banswara Syntex Ltd.'s decision are reproduced below:
7. In the present appeal it is contended on behalf of the appellant that the duty was payable when the single ply yarn was manufactured. It is not in dispute that at the stage of the manufacture of the single ply yarn, there comes into existence an excisable item. The respondent manufactures singleply yarn and it is only thereafter, if required by its customers, that the said yarn is doubled or multifolded, as the need arises. Mere doubling or multi-folding of the single yarn which is manufactured does not bring into existence a new product. The single yarn which is manufactured is an excisable item and would be subject to duty upon its manufacture.
8. It is immaterial, in view of Rule 9(1) of the Central Excise Rules and Section 49 of the Act whether the yarn so manufactured is captively consumed or is subjected to any other or further process. Reference may be made to K. Spinning and Weaving Mills Ltd. and Am. v. Union of India (UOI) and Ors. where Rules 9 and 49 of the Central Excise Rules, 1944, after they were amended with retrospective effect by Section 51 of the Finance Act, 1982 came up for interpretation. It was held that "In view of the deeming provisions under explanation to Rules 9 and 49, although the goods which are produced or manufactured at an intermediate stage and, therefore, consumed or utilised in the integrated process for the manufacture of another commodity is not actually removed, shall be construed and regarded as removed." Dealing with the question of conversion of unsized yarn into sized yarn it was observed at page 250 as follows:
In our view, the High Court by the impugned judgment has rightly held that the appellants are not liable to pay any excise duty on the yarn after it is sized for the purpose of weaving the same into fabrics. No distinction can be made between unsized yarn and sized yarn, for the unsized yarn when converted into sized yarn does not lose its character as yarn.
The same principle would be applicable in the present case. A single ply yarn is first manufactured and thereafter it is doubled or multifolded, depending upon the type of fabric which is ultimately to be woven. The liability to pay excise duty would arise on the manufacture of the single ply yarn and not after the same has been doubled or multifolded. Doubling or multi-folding of the same yarn does not bring into existence a new product and no duty is leviable at that stage.
9. Learned Counsel for the respondent sought to place reliance on the decision of this Court in Bhilwara Spinners Ltd. v. Collector of Central Excise in support of his contention that the respondent was liable to pay duty on the doubled yarn and no duty ought to be levied on the single yarn. In our opinion this judgment can be of little assistance to the respondents.
10. In Bhilwara Spinners case the company was engaged in the manufacture of fabrics. For that purpose it manufactured four types of yarns. The yarn when produced was a single yarn but the appellant doubled and multifolded the yarn as a step towards manufacture of fabrics. The appellant's case was that it had been paying duty on doubled or multifolded yarn but not on single yarr. When called upon by the Excise Department to show cause why duty should not be levied on the single yarn, the contention of the appellant therein was that both single stage yarn and dou- bled/multifolded yarn are one and the same goods and inasmuch as it was paying duty on the doubled/multifolded yarn no duty was payable on the single yarn. The appellate Collector accepted this contention but the Tribunal agreed with the Revenue. This Court, in appeal, did not go into the question whether single yarn or doubled/multifolded yarn are one and the same goods and observed as follows:
We are concerned in this case with the only question whether single yarn attracts duty or not. In view of the finding of the Tribunal affirming Ihe finding of the Assistant Collector that single yarn is a completely manufactured product, it cannot be disputed that it attracts duty. We are not concerned with the question whether the doubling/multifolding of the said yarn results in different goods or not and whether duty is leviable on doubled/multifolded yarn. We need only say that the Tribunal is right in its opinion that the single yarn is subject to duty though used in the manufacture of fabrics in a continuous process of manufacture.
11. These observations are not at variance with the decision in J.K. Spinning's case (supra). In view of the fact that an excisable item comes into existence with the manufacture of a single ply yarn it becomes liable to pay excise duty at that stage itself. The respondent cannot be allowed to contend that the levy of excise duty is postponed to a point of time when the yarn is removed after doubling or multifolding. The liability to pay excise duty arises at the first stage itself, namely, at the time of manufacture of single ply yarn. This being so the demand raised by the Assistant Collector was not invalid.
In the subsequent decision of the Apex Court in Rajasthan Spg. & Wvg. Mills Ltd. v. CCE, Jaipur , the Court has, while upholding the contention of the Revenue that the stage of levy of duty on yarn in a composite unit is the single ply yarn stage, relied upon the Banswara Syntex Ltd.'s decision supra that liability to pay excise duty would arise on the manufacture of the single ply yarn and not after the same has been doubled or multifolded and doubling or multifolding of the same yarn does not bring into existence a new product and no duty is leviable at that stage.
4. Learned SDK's reliance on the decision of the Supreme Court in Adityn Mills Ltd. v. Union of India , holding that PPRF yarn consisting of two plies of polyester spun yarn - PP and one ply of rayon filament yarn - RF doubled together, is different from polyester spun yarn and rayon filament yarn and doubling and twisting of two different yarns amounts to manufacture of a new type of yarn, is misplaced for the reasons that the product under consideration was composed of two different yarns while in the present case duty paid single ply yarn of only one type or variety is doubled or multi- folded and further in Adityn Mills Ltd. case, the Tribunal relied upon evidence adduced before it by the Revenue that PPRF yarn is known in the market as a yarn different from polyester spun yarn and rayon filament yarn, while in the present case no such evidence has been led in by the Revenue. Further, in the later decision of the Apex Court in Bhilwara Spinners Ltd. supra, Aditya Mills decision has been noted. The other decision of the Apex Court relied upon by the Revenue, viz. CCE v. Rajasthan Spg. of Wvg. Mills Ltd. , is also distinguishable for the reason that the product in dispute was composite yarn containing polyester/viscose/acrylic fibres, while the product under consideration before us is not a composite yarn.
5. It is also relevant to note that in the appeal filed by the Revenue to the Supreme Court against the Tribunal's order in Madura Coats Ltd. v. CCE, Tricky 2000 (37) RLT 68, holding that doubling or multifolding of duty paid single yarn is not a process of manufacture, relying upon the Banswara Syntex decision and Porritts & Spencer (Asia) Ltd. v. CCE , the department did not dispute the principle enunciated by the Apex Court in the above mentioned two decisions, but the only grievance was that since the plea that there was no manufacture of twisted yarn subsequent to the manufacture of duty paid single ply yarn was raised for the first time before the Tribunal, the matter should have been remanded to the Assistant Commissioner for determination of the factual basis of this claim, as seen from 2005 (68) RLT 343 (S.C.).
6. As regards the fact that complete exemption from payment of excise duty is granted to doubled or multifolded yarn including doubled yarn manufactured out of duty paid yarn falling under chapters 52, 54 or 55 of the Schedule to the GET A, 1985, in terms of Serial No. 50 of the table to notification 31/93-C.E. dated 28-2-1993, noted by the referring bench, it is well settled that mention of an item in an exemption notification is not determinative of its excisability (see Kiran Spg. Mills Thane v. CCE, Bombay and CCE, Chandigarh v. Metro Tyres , Even in the case of goods mentioned in chapter notes the notes cannot operate retrospectively so as to levy duty for the period prior to the introduction of the note to the chapter, as seen from the decision of the Tribunal in Morarjee Goculdas Spg. & Wvg. Co. Ltd. v. CCE, Mumbai-1 2004 (172) E.L.T. 35 in respect of dutiability of doubled yarn made out of duty paid spindle stage yarn. The Tribunal has held that only when a new commercial entity emerges as per the tests prescribed by the Apex Court, viz. twin tests of manufacture and marketability, duty can be levied, and set aside the demand confirmed on the basis of Note 1 to Chapter 52 introduced on 16-3-1995, to include doubled yarn as excisable goods. The Tribunal relied upon the Apex Court's decision in Banswara Syntex Ltd. cited supra.
7. In the light of the above discussion, we answer the reference in the negative, and against the Revenue.