Manufacture of yarn completes at spindle stage; later sizing does not postpone excise duty liability.

Manufacture of yarn is treated as complete when the yarn emerges from the spindle stage, because that is when the goods first come into existence. Sizing done afterwards is not an essential, incidental or ancillary part of manufacture, but a post-manufacture process. Excise duty under Tariff Item No. 18E is therefore chargeable at the spindle stage, and later sizing or removal of the sized yarn from the factory does not change the point of liability. A contrary observation relied on by the assessees was regarded as obiter and not controlling.

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Issues: Whether manufacture of yarn is complete at the spindle stage, and whether subsequent sizing and sale of the sized yarn outside the factory affect excise liability under Tariff Item No. 18E of the First Schedule to the Central Excises & Salt Act.

Analysis: The decisive question was when yarn comes into existence as manufactured goods. The reasoning adopted that manufacture is complete when the yarn emerges from the ring frame at the spindle stage. Sizing was treated as a process occurring after manufacture, not as a pre-manufacturing step, nor as an essential, incidental, or ancillary part of manufacture. Since sizing merely follows manufacture, the fact that the yarn was later sized and either consumed internally or sold outside did not alter the point at which excise duty became chargeable. The observation relied upon by the respondents from another decision was treated as obiter and not as governing the present controversy.

Conclusion: Manufacture of yarn is complete at the spindle stage, sizing is not part of manufacture, and excise duty is chargeable on that basis without regard to subsequent sizing or the ultimate removal of the sized yarn.

Ratio Decidendi: A process carried out after the goods have already come into existence is not incidental or ancillary to manufacture and cannot postpone the point at which excise duty becomes chargeable.

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