Yarn shortage duty demand required factual verification of spindle-stage loss versus conversion into doubled yarn.

Duty demand on alleged yarn shortage could not be sustained without first determining whether the shortage related to single ply yarn at the spindle stage or merely reflected weight difference arising from conversion into doubled or multi-folded yarn. The departmental working of the shortage was not explained in the orders below, and the defence that conversion process and waste generation caused the apparent difference required examination. Because the material factual issue had not been addressed, the basis for the demand remained incomplete, and the matter was remanded for fresh consideration and a fresh order after hearing the appellants.

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Issues: Whether the demand of duty on the alleged shortage of yarn could be sustained without a finding on whether the shortage was of single ply yarn at the spindle stage or merely the difference arising after conversion into doubled or multi-folded yarn.

Analysis: The shortage worked out by the department was not explained in the orders below. The contention that the apparent difference in weight arose because single ply yarn was converted into doubled or multi-folded yarn, with consequential waste generation in the process, was a vital defence and required examination. As the authorities below had not addressed this material issue, the factual basis for the demand remained incomplete.

Conclusion: The matter was remanded for fresh consideration of the shortage issue and for passing a fresh order after hearing the appellants.

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