Excise classification of blended yarn failed under existing entries, making pre-Item 18E duty collection unlawful and refundable.

Blended yarn containing 60% or more cotton and the balance staple fibre of cellulosic origin was not chargeable under Item 18 or Item 18A of the First Schedule to the Central Excises and Salt Act, 1944 before Item 18E was introduced. Item 18 applied to rayon and synthetic fibres and yarn, while Item 18A covered cotton twist, yarn and thread in the strict statutory sense; the blended yarn did not fit either charging entry. Trade notices and departmental practice could not enlarge the scope of the levy or replace legislative amendment. As the pre-Item 18E collection was unauthorised, the amounts paid were recoverable as duty collected without legal sanction, and refund was due.

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Issues: Whether blended yarn containing 60% or more cotton and the balance staple fibre of cellulosic origin was chargeable to excise duty under Item 18 or Item 18A of the First Schedule to the Central Excises and Salt Act, 1944 before the introduction of Item 18E, and whether duty collected on that basis was refundable.

Analysis: Item 18 covered rayon and synthetic fibres and yarn, while Item 18A dealt with cotton twist, yarn and thread. The Court held that blended yarn of the kind manufactured by the petitioner did not fit either description: it was neither rayon or synthetic yarn under Item 18 nor cotton yarn in the strict statutory sense under Item 18A. Trade notices and departmental practice could not enlarge the charging entry or substitute for legislative amendment. The introduction of Item 18E in 1972 was treated as recognizing that blended yarn had not been adequately covered earlier. Since the levy and collection on the petitioner's blended yarn prior to Item 18E were not authorised by law, the payments were treated as recoverable as duty collected under mistake and without legal sanction.

Conclusion: The levy of excise duty on the petitioner's blended yarn under Item 18 or Item 18A prior to Item 18E was not sustainable, and the petitioner was entitled to refund.

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