Captive consumption valuation for man-made yarn must be based on unsized yarn, not sized yarn, where sizing is not manufacture.

For captively consumed man-made yarn in a composite mill, assessable value for duty was to be determined on the basis of unsized yarn rather than sized yarn. Sizing was not treated as a manufacturing process for Chapter 55 under the relevant tariff entry, and the Board's section 37B order, read with the principle relied upon, supported valuation at the pre-sizing stage. Duty therefore had to be computed on the yarn's value before sizing, not on the value after sizing, where the yarn was used in weaving within the same mill.

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Issues: Whether, for duty on man-made yarn captively consumed in a composite mill for weaving during the relevant period, the assessable value was to be taken on the basis of unsized yarn or sized yarn.

Analysis: The yarn was captively consumed in the same composite mill after sizing, but the relevant tariff entry did not treat sizing as a process of manufacture for Chapter 55. The Board's order under section 37B of the Central Excise Act, 1944, together with the principle recognised in the decision relied upon, supported valuation at the stage before sizing. On that basis, duty was required to be computed on the value of the yarn as it stood prior to sizing.

Conclusion: The assessable value had to be taken on the basis of unsized yarn, not sized yarn, and the assessee succeeded.

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