Dyeing of duty-paid woollen yarn is not manufacture and does not attract a second excise levy.

Dyed worsted woollen yarn that had already suffered duty at the grey stage was treated as not liable to a second levy merely because it was later dyed. The processing did not bring into existence a new commodity with a different name, character or use, and dyeing of woollen yarn was not covered as manufacture under central excise law. Duty was therefore regarded as arising only once, based on the form in which the yarn was cleared from the factory of production, so no further duty was leviable on the dyed processed yarn.

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Issues: Whether dyed worsted woollen yarn, already duty-paid at the grey stage under Item 18B of the Central Excise Tariff, could be subjected to further duty on processing by dyeing, and whether dyeing of woollen yarn amounted to manufacture under central excise law.

Analysis: The Government held that dyeing of duty-paid grey woollen yarn did not bring into existence a new commodity having a different name, character or use. It was found that once the woollen yarn had suffered duty at the grey stage and had been cleared from the factory of production, there was no scope for levying duty again on the same yarn merely because it was later processed by dyeing. The order also held that the definition of manufacture under central excise law did not encompass dyeing of woollen yarn. The liability was stated to arise only once, depending on the form in which the yarn was cleared from the factory of manufacture.

Conclusion: Further duty on the dyed processed yarn was not leviable, and the revision application succeeded.

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