Manufacture by texturising flat yarn triggers duty on removal; exemption notification does not shift the levy stage.

Conversion of flat man-made filament yarn into textured or crimped yarn is manufacture because the two processes are distinct and the resulting goods are separately known and traded commodities. The change from one tariff sub-item to another was treated as a process of manufacture within Section 2(f), so duty attached to the flat yarn when it was removed for use in further manufacture. Notification No. 55/78 granted exemption from duty but did not alter the stage of levy under Section 3 or the collection mechanism under Rules 9 and 49. The claim that duty was not payable until texturising was rejected.

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Issues: Whether the conversion of flat man-made filament yarn into textured or crimped yarn amounts to manufacture, and whether duty is leviable on the flat yarn before its use in the texturising process despite Notification No. 55/78.

Analysis: The process of producing flat yarn was held to be distinct from the process of texturising it, and the two were not treated as one integrated process. Flat yarn and crimped yarn were found to be different commodities, separately known in the market and separately quoted, and the change from one tariff sub-item to another was treated as a process of manufacture within Section 2(f). The notification under Rule 8(1) was held to grant exemption from duty but not to control the stage of levy under Section 3, and the manner of collection under Rules 9 and 49 required duty to be charged when excisable goods are removed for manufacture of other excisable goods.

Conclusion: The conversion of flat yarn into textured yarn is manufacture, and duty is leviable on the flat yarn before it is used for making textured yarn; the assessee's reliance on the notification fails.

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