Separate excise classification and strict credit procedure govern duty on dyed yarn and deny set-off without compliance.

Separate tariff classification of grey yarn and dyed worsted woollen yarn treated the dyed product as a distinct excisable commodity, so manufacture was recognised at the dyeing stage and duty could be levied independently. The article also states that proforma credit or set-off under Rule 56A required strict compliance with the prescribed application and procedural steps; without following sub-rule (2), the credit claim could not be entertained. A later relaxation provision did not apply to the relevant period, so prior practice could not replace the rule. The result described is that both the duty demand and the refusal of credit were sustained.

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Issues: (i) Whether dyed worsted woollen yarn was a distinct excisable product from grey yarn so as to attract separate levy of duty; (ii) Whether the assessee was entitled to set-off or proforma credit under Rule 56A without following the prescribed procedure under sub-rule (2).

Issue (i): Whether dyed worsted woollen yarn was a distinct excisable product from grey yarn so as to attract separate levy of duty.

Analysis: The goods were covered by separate tariff entries with different duty structure. The existence of separate tariff treatment for grey yarn and dyed yarn indicated that they were treated as different goods for excise purposes. On that basis, the conversion of grey yarn into dyed yarn amounted to manufacture of a distinct excisable commodity, and the levy of duty on both stages could not be denied on the footing that no manufacture had occurred.

Conclusion: The separate levy on dyed yarn was upheld and the contention that no manufacture took place was rejected.

Issue (ii): Whether the assessee was entitled to set-off or proforma credit under Rule 56A without following the prescribed procedure under sub-rule (2).

Analysis: The assessee had paid duty on both grey yarn and dyed yarn but had not made the application or followed the procedure required for proforma credit under Rule 56A(2). The amendment introducing Rule 56A(2B) empowering condonation of procedural defects came later and did not govern the relevant period. In the absence of compliance with the prescribed procedure, the claim for set-off or credit could not be entertained, and the prior practice could not override the rule.

Conclusion: The claim for set-off or proforma credit was rightly rejected.

Final Conclusion: The demand and the denial of credit were sustained, and the appeal failed on merits.

Ratio Decidendi: Where a commodity is separately classified in the tariff as a distinct excisable product, duty can be levied on its manufacture even if it arises from an already duty-paid input, and concessional credit or set-off cannot be claimed without strict compliance with the prescribed procedure unless the applicable rule expressly grants relaxation.

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