Excise duty follows the form of clearance: unsized yarn was the taxable product, not later sized yarn.

Central excise duty under Item 18E was stated to be chargeable on the yarn in the form in which it was cleared for further use, namely the unsized yarn taken from the spinning department to the weaving department, because there was no material showing clearance after sizing. The duty was therefore to be levied on the unsized weight of the yarn, not on a later processed sized form that was not the subject of clearance. The revision was allowed on merits, and the limitation issue and Rule 10A were not examined.

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Issues: Whether central excise duty under Item 18E of the First Schedule to the Central Excises and Salt Act, 1944 was chargeable on yarn in its sized form or on the unsized yarn as cleared from the spinning department to the weaving department.

Analysis: The clearance of yarn in cones in unsized form from the spinning department to the weaving department was not disputed. There was no material to show that the goods were ever cleared after sizing. The duty under Item 18E was therefore to be levied on the yarn in the form in which it was cleared for further use, namely the unsized yarn, and on the unsized weight of the yarn. As the revision was allowed on merits, the question of limitation and the applicability of Rule 10A of the Central Excise Rules, 1975 was not gone into.

Conclusion: Duty was chargeable on the unsized yarn as cleared, not on the sized yarn; the assessee succeeded on the merits.

Final Conclusion: The revision was allowed and the appellate order was set aside on the substantive excise duty issue.

Ratio Decidendi: For excise valuation and levy, duty is chargeable on the goods in the form in which they are cleared from the place of removal, not on a later processed form that is not the subject of clearance.

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