Excise duty on blended yarn applies at spindle stage; later sizing for weaving does not shift the assessment point.

Blended yarn under Tariff Item 18E was treated as manufactured and assessable at the spindle stage on its unsized weight. Sizing was described as a later process done to strengthen yarn for weaving, especially warp use, and not as a change in the basic character of the yarn. Prior revisional orders were relied on to confirm that, where yarn is cleared for captive use in unsized form from the spinning department, duty is chargeable on the form and weight in which it is removed. On that basis, the differential duty demands based on sized weight were quashed.

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Issues: Whether excise duty on blended yarn falling under Tariff Item 18E was leviable on the yarn at the spindle point before sizing or on the sized yarn after it was wound on cones, bobbins or beams.

Analysis: The dispute turned on the stage at which the manufacture and clearable form of blended yarn was complete for purposes of assessment under Tariff Item 18E. The Court noted that the yarn was manufactured at the spindle stage and that sizing was applied only to strengthen yarn used in weaving, especially for warp purposes, and did not alter the basic manufactured character of the yarn. The Court further relied on prior revisional orders of the Government of India which had accepted that where yarn was cleared for captive consumption in unsized form from the spinning department to the weaving department, duty had to be charged on the form and weight in which it was so cleared. In the absence of any contrary view, those decisions were treated as binding for the present case.

Conclusion: Excise duty under Tariff Item 18E was leviable on blended yarn at the spindle stage on its unsized weight, not after sizing.

Final Conclusion: The show cause notices demanding differential duty on the basis of sized weight were quashed and the petition succeeded.

Ratio Decidendi: Where yarn is fully manufactured and cleared for captive use in unsized form, subsequent sizing for weaving does not shift the point of excise assessment from the form in which the yarn is removed from the spinning department.

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