Excise duty on yarn is confined to unsized yarn at the spindle stage, excluding later sizing weight.

Excise duty on yarn manufactured in composite mills is levied at the stage the yarn is manufactured and becomes marketable at the spindle stage. Sizing is a later process used only for weaving and is not part of the manufacture of yarn, so the added weight from sizing cannot be included in the duty base. The duty is therefore chargeable only on the weight of unsized yarn, not on sized yarn.

---

---

Issues: Whether, in the case of composite mills manufacturing yarn for use in their weaving department, central excise duty on yarn is leviable on the weight of sized yarn or only on the weight of unsized yarn at the spindle stage.

Analysis: The taxable event is the manufacture of yarn, and sizing is a later process undertaken only for weaving purposes. Yarn becomes a marketable commodity at the spindle stage, before sizing, and the added weight of sizing material does not form part of the manufacture of yarn. Excise duty must therefore be assessed on the yarn as manufactured, without including the weight added by sizing.

Conclusion: Excise duty on yarn in composite mills is chargeable only on the weight of unsized yarn at the spindle stage, and not on the weight of sized yarn.

Ratio Decidendi: Where a subsequent process is applied only for use in weaving and is not part of the manufacture of yarn, excise duty must be levied on the commodity as manufactured at the marketable stage, excluding any later addition in weight from such process.

---