Rule 49A duty deferment did not cover diverted bobbin yarn converted into straight reel hanks.

Unutilised yarn taken onto bobbins or cones was treated as having reached a marketable stage, and deferment of excise duty under Rule 49A applied only where yarn was taken for beaming or warping and ultimately used in the manufacture of fabric, with duty discharged at fabric clearance. When such bobbin yarn was diverted and converted into straight reel hanks, the statutory condition for deferment was not satisfied, so duty became payable before conversion. The plea of discrimination was rejected because no evidence showed comparable treatment of purely spinning units.

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Issues: Whether unutilised yarn on bobbins, when converted into straight reel hanks, remained covered by the deferment of duty under Rule 49A and was therefore not liable to immediate excise duty.

Analysis: Yarn taken from spindles onto bobbins or cones was treated as having reached a marketable stage. Rule 49A deferred duty only where the yarn was taken for beaming or warping and ultimately used in the manufacture of fabric, with clearance of the fabric being the point at which duty was discharged. Where unutilised bobbin yarn was diverted and converted into straight reel hanks, the condition for deferment was not satisfied and the yarn became liable to duty before such conversion. The plea of discrimination was also rejected for want of evidence of comparable treatment in purely spinning units.

Conclusion: The conversion of unutilised bobbin yarn into straight reel hanks was not covered by the deferment under Rule 49A, and excise duty was payable on such yarn.

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