Manufacture-stage duty on single ply yarn defeated exemption claim for multifold reel hanks cleared without duty.

Duty attached at the stage when single ply yarn came into existence, because an excisable article is complete on manufacture and cannot escape duty until a later processing stage. As no duty had been paid either on cotton yarn in cone form or on the multifold straight cotton reel hank stage, the claimed exemption under Notification No. 53/91 for cleared multifold straight reel hanks was not available. The departmental demand was therefore upheld and the exemption claim failed.

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Issues: Whether duty was payable at the stage of manufacture of single ply yarn and whether exemption under Notification No. 53/91 dated 25-7-1991 was available for multifold straight reel hanks cleared without payment of duty.

Analysis: The Tribunal relied on the principle that an excisable article comes into existence at the stage of manufacture of single ply yarn and duty liability attaches at that stage itself. Since the doubled or multifold yarn had been cleared without payment of duty, no duty had been discharged either at the stage of cotton yarn in cone form or at the multifold straight cotton reel hank stage. On that basis, the claim to exemption was negatived and the departmental demand was held sustainable.

Conclusion: Duty was payable at the single ply yarn stage and the exemption claim failed.

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