Excise classification of spinning waste: partially wound polyester filament yarn was treated as waste, defeating the duty demand.

Polyester filament yarn of 1 kg or less arising during the spinning process was treated as waste rather than marketable yarn because the surrounding record, including contemporaneous correspondence, stock verification and field officers' observations, showed that the assessee and the Revenue's officers regarded the partially wound material as waste. The Tribunal's factual finding was that it was not cleared as yarn but disposed of as waste, so the quantities recorded in the log sheets could not be assumed to represent removal of dutiable yarn. On that basis, central excise duty was not sustainable.

---

---

Issues: Whether polyester filament yarn of 1 kg or less, arising during the spinning process and treated by the assessee as waste, was excisable as yarn and liable to central excise duty.

Analysis: The disputed quantity arose at the machine stage, but the surrounding record, including contemporaneous correspondence, stock verification, and field officers' observations, showed that the assessee treated such partially wound material as waste and not as marketable yarn. The factual finding recorded by the Tribunal was that the material was not cleared as yarn but was disposed of as waste, and that the Revenue's own officers had treated the yarn-stage residue as waste in their dealings with the factory. On that basis, the Tribunal concluded that the entire quantity recorded in the log sheets could not be assumed to have been removed as dutiable yarn.

Conclusion: The material of 1 kg or less was rightly treated as waste and not as excisable yarn; the demand of duty was not sustainable.

---