Excise duty on single ply yarn attaches at manufacture, not after doubling or multifolding, SC confirms.

Single ply yarn became an excisable product at the spindle stage, so central excise duty attached on manufacture rather than after later doubling or multifolding. Mere further processing of the same yarn did not create a new commodity, and duty could not be postponed because the goods were subsequently captively consumed or subjected to additional treatment. Applying Rule 9(1) of the Central Excise Rules, 1944 and Section 49 of the Central Excises and Salt Act, 1944, the SC held that the first manufactured excisable product bears the levy at the point of manufacture, and the demand was upheld.

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Issues: Whether central excise duty on single ply yarn was payable at the stage of its manufacture or only after it was doubled or multifolded.

Analysis: Single ply yarn came into existence as an excisable product at the spindle stage. Mere doubling or multifolding of the same yarn did not bring into existence a new commodity. In view of Rule 9(1) of the Central Excise Rules, 1944 and Section 49 of the Central Excises and Salt Act, 1944, duty attaches when the excisable goods are manufactured, and the liability is not postponed because the goods are later subjected to further processing or captively consumed. The earlier decision on sized yarn and the later decision concerning single yarn both supported the proposition that the first manufactured excisable product bears the levy at the stage of manufacture.

Conclusion: The duty was payable on manufacture of the single ply yarn and not at the later stage of doubling or multifolding, so the demand was valid and the assessee's challenge failed.

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