Concessional excise classification for semi-finished yarn upheld where tariff entry, not transport mode, determined base yarn status

Partially oriented yarn transported as semi-finished goods under Rule 56B retained its character for concessional excise treatment. Because the yarn fell within the relevant tariff entry and the notification defined base yarn by reference to that entry, it was treated as base yarn for the concessional duty notification. Its movement for texturising did not change its classification, so the concessional rate applied to the resulting texturised yarn and the contrary duty order was set aside.

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Issues: Whether partially oriented yarn transported under Rule 56B of the Central Excise Rules, 1944 and used for texturising could be treated as base yarn for the concessional duty notification issued under Rule 8 of the Central Excise Rules, 1944.

Analysis: The yarn manufactured by the petitioner was excisable and fell within Item 18 II(i)(a) of the First Schedule to the Central Excises and Salt Act, 1944. The fact that it was moved as semi-finished goods under Rule 56B did not alter its character for the purpose of the exemption notification. Since the notification defined base yarn by reference to the tariff entry and the yarn answered that description, the concessional rate applied to the texturised yarn.

Conclusion: The partially oriented yarn was base yarn within the notification, and the petitioner was liable to pay excise duty on the texturised yarn at Rs. 66.25 per kilogram, together with any applicable special or additional duty.

Final Conclusion: The petition succeeded and the contrary duty order was set aside, with the duty liability determined in accordance with the concessional notification.

Ratio Decidendi: For purposes of a concessional excise notification, the character of goods is determined by the tariff entry and the notification itself, and their movement as semi-finished goods under Rule 56B does not exclude them from being treated as base yarn.

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