Exempt dyed yarn value cannot be used to assess grey yarn duty; differential duty direction was set aside.

Grey yarn could not be assessed to duty by adopting the value of dyed yarn, because dyed yarn had already been accepted as exempt under Notification No. 35/95-CE and its sale price was not relevant to valuing the raw material. The additional value attributable to dyeing could not be carried back into the assessable value of grey yarn, and exempt goods could not form the basis for differential duty on that footing. The direction to initiate proceedings for differential duty on the dyed yarn value was therefore held illegal and set aside.

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Issues: Whether the value of dyed yarn could be adopted for assessing the grey yarn to duty and whether the direction to initiate proceedings for differential duty on that basis was legally sustainable.

Analysis: The proceedings had already accepted that dyed yarn was exempt under Notification No. 35/95-CE. On that premise, the sale price of the exempt finished product could not be used to fix the assessable value of the grey yarn, which was only the raw material. The additional value arising from dyeing had no relevance to the valuation of grey yarn, and exempted goods could not simultaneously form the basis of duty on that footing.

Conclusion: The direction to initiate proceedings for differential duty on the basis of the dyed yarn value was illegal and was set aside. The appeal succeeded.

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