Cotton yarn classification prevents duty at intermediate cone stage where processing does not create a new commodity.

Cotton yarn in hanks, cones, cheeses and doubling bobbins was treated as the same excisable commodity throughout the processing stages. The tariff entry and its explanations showed that these forms remained within the cotton yarn classification, and winding, reeling and doubling did not create a new product or amount to removal for manufacture of another commodity. Duty therefore could not be levied at the intermediate cone stage under Rules 9 and 49, especially where the exemption for yarn in plain reel hanks would otherwise be undermined. The extended definition of manufacture was read as targeting clearance from hank form for conversion into another form, not repeated levies at internal stages.

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Issues: Whether multiple fold cotton yarn in cones, cheeses and doubling bobbins remained the same excisable commodity as cotton yarn in hanks, so that duty could be demanded at the intermediate cone stage under Rules 9 and 49 of the Central Excise Rules, 1944, notwithstanding the exemption granted to hanks under Notification No. 131/77-Central Excises dated 18-6-1977.

Analysis: Cotton yarn was held to continue to be cotton yarn throughout the successive stages of bobbins, cones/cheeses, doubling bobbins and hanks. The tariff description and the relevant explanations treated bobbins, cones and hanks as different forms of the same commodity, while the explanation dealing with multiple fold yarn showed that such yarn was included within the tariff entry for cotton yarn. The process of winding, reeling and doubling did not create a new commodity, and there was no removal of excisable goods at the intermediate stage for consumption, export or manufacture of another commodity. The exemption notification for single yarn and multiple fold yarn in plain reel hanks would be rendered ineffective if duty were levied repeatedly at each intermediate form. The extended definition of manufacture was understood as addressing clearance of hank yarn followed by conversion into another form, not as authorising levy at every internal processing stage.

Conclusion: Duty was not chargeable at the cone stage, and the assessee was entitled to treat the yarn as the same commodity until its removal in hank form.

Final Conclusion: The departmental challenge failed and the appellate order setting aside the duty demand was affirmed.

Ratio Decidendi: Where a tariff entry and its explanations treat successive forms of a product as the same commodity, internal processing stages do not amount to removal for manufacture of another commodity, and duty cannot be levied repeatedly so as to defeat the exemption granted to the final form.

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