Burden of proof on excise duty on base yarn shifts to the Department once market receipt of goods is shown.

Differential excise duty on base yarn was held unsustainable where the appellants only processed or texturised acrylic yarn bought from the open market and produced records of receipt and processing. The levy under the tariff and exemption structure applied only if duty on the base yarn had not already been paid, and liability attached to the manufacturer of the excisable goods, not to processors who did not manufacture the base yarn. Once the appellants showed prima facie market receipt of duty-paid goods, the burden shifted to the Department to prove non-payment of duty on the base yarn. As no effective rebuttal was made, the demand failed.

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Issues: Whether the differential excise duty on base yarn could be demanded from the appellants, who only processed or texturised yarn received from the open market, on the footing that the base yarn had not already suffered duty, and on whom the burden of proof lay.

Analysis: The appellants established that they received acrylic yarn from traders in the open market and produced documents showing receipt and processing of the goods. The tariff entry and the exemption structure contemplated levy only if the duty on the base yarn had not already been paid. Under the charging scheme, liability attached to the manufacturer of the excisable goods, and the appellants were not manufacturers of the base yarn. The presumption that goods available in the market had already suffered duty applied, and once the appellants furnished prima facie evidence of such receipt, the burden shifted to the Department to show that duty had not been paid on the base yarn. The Department made no effective enquiry to rebut that showing.

Conclusion: The differential duty demand was not sustainable and the appeals were entitled to succeed.

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