Excise duty on yarn arises at manufacture of single ply yarn, not when doubled or multifolded later.

Excise duty on yarn attaches when single ply yarn is manufactured if later doubling or multifolding does not create a new product; the Tribunal applied the Supreme Court ruling in Banswara Syntex and held that the duty event arises at manufacture of the single ply yarn, not at the later processing stage. The change from a specific rate to an ad valorem levy did not alter that principle. On that basis, the demand raised on doubled or multifolded yarn was not sustainable.

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Issues: Whether excise duty on yarn was payable at the stage of single ply yarn or at the later stage when the same yarn was doubled or multifolded and cleared from the factory.

Analysis: The dispute turned on the stage at which the excisable commodity emerged for duty purposes and on the relevance of the valuation rule applicable at removal. The Revenue relied on the rule that duty is chargeable on goods in the form and value prevailing at the time of removal, while the assessee relied on the principle that single ply yarn itself was the dutiable product and that doubling or multifolding did not create a new commodity. The Tribunal followed the binding Supreme Court ruling in Banswara Syntex, holding that where yarn alone was manufactured and later doubled or multifolded, the liability arose at the stage of manufacture of single ply yarn and not at the later processing stage. The change from specific rate to ad valorem levy did not alter that principle.

Conclusion: The duty demand on doubled or multifolded yarn was not sustainable. The issue was decided in favour of the assessee.

Ratio Decidendi: Where a single ply yarn is first manufactured and later doubled or multifolded without bringing into existence a new product, excise duty attaches at the stage of manufacture of the single ply yarn, and later doubling or multifolding does not create a fresh duty event.

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