Deemed removal under excise rules limits duty to the first stage, preventing a second levy on doubled yarn.

Rules 9 and 49 of the Central Excise Rules, 1944 deem goods used in the same premises for further processing to be removed immediately before such consumption or utilisation, so duty is chargeable at that first stage. Single yarn had already suffered duty at the spindle stage, and doubling or multi-folding was not treated as manufacture. The later clearance of doubled or multi-folded yarn therefore did not justify a second levy, and Notification No. 26/94 supported the view that no additional duty was payable. The Revenue's demand was unsustainable, and duty remained confined to the single yarn stage.

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Issues: Whether duty on yarn was payable at the stage of removal of the single yarn from the factory when the same was subjected to doubling or multi-folding, and whether duty could again be demanded on the doubled or multi-folded yarn cleared from the factory.

Analysis: The Explanation to Rules 9 and 49 of the Central Excise Rules, 1944 creates a legal fiction that goods produced and then consumed or utilised in the same premises for further processing are deemed to have been removed immediately before such consumption or utilisation. On the facts, single ply yarn had already suffered duty at the spindle stage on the basis of its value, and the subsequent process of doubling or multi-folding did not amount to manufacture. Since the removal for further processing was a deemed removal, the duty burden was correctly discharged at the single yarn stage. In that situation, the value of doubled or multi-folded yarn was not the relevant basis for a further levy, and Notification No. 26/94 also supported the position that no additional duty was payable on the later clearance.

Conclusion: Duty was correctly paid on the single yarn stage, and no further duty was payable on the doubled or multi-folded yarn. The Revenue's demand was not sustainable, and the issue was decided in favour of the assessee.

Ratio Decidendi: Where yarn is deemed to be removed for captive further processing under Rules 9 and 49, and the later process does not amount to manufacture, duty is chargeable only at the first stage of deemed removal and cannot be levied again on the processed product.

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