Twisted filament yarn exemption turns on marketability after winding, with nil-rate relief applying to duty-paid yarn.

Twisting and allied processes on filament yarn are treated as manufacture under Chapter Note 3 to Chapter 54, but excise duty liability still depends on the yarn reaching a marketable form. The commentary states that twisted yarn becomes marketable only after winding, and wound twisted yarn made out of duty-paid yarn falls within the nil-rate exemption for yarn under the relevant notification. The same view had been followed in earlier appeals, leaving no basis to sustain the Revenue's challenge against exemption.

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Issues: Whether twisted filament yarn subjected to winding was liable to central excise duty or was entitled to exemption under the relevant notifications, and whether the Revenue appeal against the allowance of such exemption should succeed.

Analysis: Chapter Note 3 to Chapter 54 treats twisting and allied processes on filament yarn as manufacture, but duty liability still depends on the product attaining a marketable form. The finding accepted was that twisted yarn becomes marketable only after winding, and that the wound twisted yarn falls within the nil-rate exemption for yarn under the relevant notification when produced out of duty-paid yarn. The same issue had already been decided in earlier appeals and was followed consistently, leaving no basis to sustain the Revenue's challenge.

Conclusion: The twisted and wound filament yarn was held eligible for exemption and not liable to duty, so the Revenue's challenge failed.

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