Exemption for woollen yarn in plain reel hanks denied once yarn is converted into cone form and becomes taxable.

Woollen yarn converted into cone form did not retain eligibility for exemption available to yarn of wool in plain (straight) reel hanks under the relevant notification. The exemption applied only to yarn in plain reel hanks, whether single or multifold, and once the yarn had reached the cone stage it no longer matched that description. It therefore fell within the residuary taxable entry for yarn of wool in any other form and attracted duty at the applicable rate. The cited authorities were distinguished as involving different factual stages or disputes, so they did not alter the result that cone-form yarn was not exempt.

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Issues: Whether woollen yarn converted into cone form remained eligible for exemption as yarn in plain (straight) reel hanks under the relevant exemption notification, or became liable to duty as yarn of wool in any other form.

Analysis: The exemption under Notification No. 26/94 as amended by Notification No. 90/94 applied only to yarn of wool in plain (straight) reel hanks, whether single or multifold. The record showed that the yarn had been taken up to the cone stage. Once converted into cone form, it ceased to answer the description of exempted yarn in plain reel hanks and fell within the residuary entry attracting duty at 10% ad valorem. The authorities below were therefore justified in confirming the demand, and the cited decisions did not govern the present factual situation because they dealt with different stages or different disputes concerning yarn in hank or cone form.

Conclusion: The yarn in cone form was not eligible for exemption under the relevant notification and was liable to duty under the taxable entry.

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