Exempt waste yarn cannot support an excise duty demand when the alleged short levy rests only on that waste.

Duty could not be demanded on the assumed waste of base yarn arising during texturising where the authorities treated loss and waste as the same. The Tribunal noted that, on the facts found, the matter was covered by its earlier view that waste yarn remained exempt during the relevant period. As the alleged short levy rested only on exempt waste yarn, no excise duty demand could be sustained on that component, and the demand was set aside in favour of the assessee.

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Issues: Whether duty was payable on the assumed waste of base yarn arising during texturising, and whether the demand could be sustained when such waste yarn was exempt.

Analysis: The demand proceeded on the footing that 6.5% of the base yarn was lost or wasted during texturising, and the adjudicating authority treated that waste as a factual basis for levy. The Tribunal held that the authorities had treated loss and waste as the same and that, on the facts found, the matter was covered by its earlier view that waste yarn remained exempt from duty during the relevant period. On that basis, no short levy could be said to arise from the waste component.

Conclusion: The duty demand on the assumed waste yarn was not sustainable and was set aside in favour of the assessee.

Ratio Decidendi: Where the alleged short levy is founded only on waste yarn that is exempt during the relevant period, no excise duty demand can be sustained on that waste.

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