Excise duty on single yarn attached at the spindle stage once manufacture was complete, despite later fabric production use.

Single yarn was treated as a fully manufactured and complete excisable commodity at the spindle stage, so central excise duty attached at that point even though it was later used in the continuous manufacture of fabrics and subsequently doubled or multifolded. The later utilisation of the yarn in an integrated production chain did not defer or negate liability once manufacture was complete. The explanations appended to Rules 9 and 49 by Notification No. 28/1982 were read as confirming that duty arises when the commodity is fully manufactured, irrespective of its subsequent removal or use. No view was expressed on whether doubled or multifolded yarn constituted separate goods.

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Issues: Whether single yarn, though used in the continuous manufacture of fabrics and later doubled or multifolded, was liable to central excise duty at the single-yarn stage.

Analysis: The finding accepted by the authorities was that single yarn was a fully manufactured and complete product at the spindle stage. Once manufacture was complete, its later use in the integrated process of fabric production did not affect its excisability. The explanations appended to Rules 9 and 49 by Notification No. 28/1982 also made clear that liability attached when the commodity was fully manufactured, irrespective of subsequent removal or utilisation in the manufacturing chain. The Court did not enter into the separate question whether doubled or multifolded yarn constituted different goods.

Conclusion: Single yarn was dutiable, and the levy at that stage was upheld.

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