Concessional excise duty on yarn continued under the special scheme despite later clearance of fabrics after withdrawal of the notification.

Yarn manufactured under the special procedure in Rules 96-V and 96-W remained covered by Notification No. 62/72-C.E. while that notification was in force, because the scheme only postponed collection of duty until fabrics were cleared and did not shift the incidence of levy from yarn to fabrics. The proviso to Rule 96-W applied only to changes in the notified rate within the scheme and did not extend to cases where the notification had already ceased to operate before clearance. Normal duty could not be applied retrospectively to yarn already produced and removed for captive consumption merely because the resulting fabrics were cleared later.

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Issues: Whether yarn manufactured during the currency of the special procedure under Rule 96-V and Rule 96-W of the Central Excise Rules remained entitled to the concessional rate notified under Notification No. 62/72-C.E. dated 17-3-1972, even though the fabrics manufactured from such yarn were cleared after the special notification was withdrawn.

Analysis: The special procedure under Rules 96-V and 96-W did not shift the incidence of excise duty from yarn to fabrics. It merely altered the basis of levy and postponed collection of the duty until clearance of the fabrics. The proviso to Rule 96-W dealt only with a change in the notified rate during the currency of the scheme and contemplated re-calculation within that scheme. It could not be stretched to cover a situation where the notification itself had ceased to apply before clearance of the fabrics. Applying normal yarn duty on the basis of the later clearance of fabrics would improperly mix two distinct schemes of levy and would amount to a retrospective application of the normal rate to yarn already produced and removed for captive consumption.

Conclusion: The yarn produced between 17-3-1972 and 23-7-1972 continued to be governed by the concessional notification, and the assessees were not liable to pay normal duty on that yarn merely because the fabrics were cleared after 24-7-1972.

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