Excise duty on yarn arises at single-ply manufacture, while doubled or multi-fold yarn may qualify for nil-duty exemption.

Excise duty on yarn was treated as payable at the single-ply stage, because Rules 9 and 49 of the Central Excise Rules deem excisable goods consumed in further manufacture to be removed before such use. Applying Banswara Syntex Ltd., the liability arose on manufacture of single-ply yarn and did not arise again merely because the yarn was later doubled or made multi-fold. The related exemption notification granted nil duty for double or multi-fold yarn manufactured out of duty-paid yarn under the specified tariff chapters, so duty already discharged at the single-yarn stage supported exemption for the further-processed yarn.

---

---

Issues: Whether excise duty on yarn was payable at the single-ply stage or only when the yarn was doubled or multi-fold.

Analysis: The dispute turned on the application of Rules 9 and 49 of the Central Excise Rules, under which excisable goods consumed or utilised in the manufacture of another commodity are deemed to have been removed immediately before such consumption or utilisation. The Supreme Court ruling in Banswara Syntex Ltd. was applied to hold that liability to duty arises on manufacture of single-ply yarn and not after it is doubled or multi-fold. The Tribunal also noted that Notification No. 26/94 as amended by Notification No. 90/94 granted nil duty for double or multi-fold yarn manufactured out of duty-paid yarn falling under Chapters 52, 54 or 55 of the Central Excise Tariff Act, and the assessee had already discharged duty at the single-yarn stage.

Conclusion: Duty was payable at the single-yarn stage, and the assessee was entitled to the benefit of the notification for the doubled or multi-fold yarn.

Ratio Decidendi: Where single-ply yarn is an excisable product and duty has been paid at that stage, no further excise duty is chargeable merely because the yarn is subsequently doubled or multi-fold, particularly when the applicable exemption notification grants nil duty to such further-processed yarn made from duty-paid inputs.

---