Manufacture by twisting different yarns, time-barred demand relief, and prospective-only exemption under the notification.

Twisting polyester yarn with cotton yarn was treated as manufacture because the doubled yarn became commercially and technically distinct from either original yarn, even though it remained classifiable in Chapter 54 by predominance of weight. The demand raised through a corrigendum was time-barred as it was issued beyond six months from the relevant date, so that additional demand could not stand. Classification under Heading 5403 was accepted on the assessee's own position, and the notification claim failed because no retrospective effect was expressly provided; the exemption operated only prospectively.

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Issues: (i) Whether twisting polyester yarn with cotton yarn resulted in manufacture of a new product liable to duty; (ii) Whether the demand raised through the corrigendum was barred by limitation; (iii) Whether the yarn was classifiable under Heading 5403 and whether exemption under the notification was available retrospectively.

Issue (i): Whether twisting polyester yarn with cotton yarn resulted in manufacture of a new product liable to duty.

Analysis: The resultant doubled yarn was held to be commercially and technically distinct from either polyester yarn or cotton yarn. A combination of two different kinds of yarn produced a new commodity, and the fact that it could still fall under Chapter 54 because of predominance in weight did not alter its character as a manufactured product. Reliance was placed on the principle that such transformation amounts to manufacture.

Conclusion: The issue was decided against the assessee and in favour of revenue.

Issue (ii): Whether the demand raised through the corrigendum was barred by limitation.

Analysis: The corrigendum demand was issued beyond six months from the relevant date. On that basis, the additional demand could not be sustained.

Conclusion: The issue was decided in favour of the assessee.

Issue (iii): Whether the yarn was classifiable under Heading 5403 and whether exemption under the notification was available retrospectively.

Analysis: The classification under Heading 5403 was accepted because the assessee itself had claimed that heading and duty had been paid accordingly. The notification relied upon was held not to contain any retrospective clause and was treated as prospective in operation.

Conclusion: The classification was upheld and the claim to retrospective exemption was rejected.

Final Conclusion: The appeal succeeded only to the extent of setting aside the time-barred portion of the demand, while the findings on manufacture, classification, and the inapplicability of retrospective exemption were maintained.

Ratio Decidendi: Twisting two different kinds of yarn into a commercially and technically distinct product constitutes manufacture, and a fiscal notification operates prospectively unless retrospective effect is expressly provided.

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