Manufacture under excise law requires a new commodity; bobbin-to-hank conversion of yarn was only a change in form.

Conversion of yarn from the bobbin stage into straight reel hanks did not amount to manufacture because it was only a change in form of the same commodity and did not create a new and distinct product. The Tribunal held that winding yarn on bobbins was merely an intermediary step in a continuous manufacturing process, so duty could not be levied on captive consumption at that stage. It also rejected reliance on the chapter note, holding that the new tariff did not expand the settled meaning of manufacture under the earlier excise law. Duty on bobbin-stage yarn was therefore unsustainable.

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Issues: Whether conversion of yarn from bobbin stage into straight reel hanks amounted to manufacture so as to justify duty on captive consumption under the Central Excise regime.

Analysis: The Tribunal held that the new tariff did not introduce any wider concept of manufacture than the one already recognised under the earlier excise law. The conversion from bobbin stage to hank stage was only a change in form of the same commodity, namely yarn, and did not bring into existence a new and distinct product. The winding of yarn on bobbins was only an intermediary step in the continuous process of manufacture, and duty could not be demanded merely because the yarn passed through different stages before reaching its final form. The reliance placed on the chapter note was rejected because the earlier statutory definition had already been interpreted in the same manner.

Conclusion: Duty was not leviable on yarn at the bobbin stage for captive use in the manufacture of straight reel hanks, and the demand was unsustainable.

Final Conclusion: The appeal succeeded and the impugned duty demand was set aside on the ground that conversion of yarn from one stage to another did not amount to manufacture of a new commodity.

Ratio Decidendi: A mere change in the stage or form of yarn, without emergence of a new commodity, does not constitute manufacture for the purpose of levy of duty on captive consumption.

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