Mother yarn as excisable goods: RG-1 entry required, but clandestine removal not proved and duty demand failed.

Mother yarn was treated as a distinct excisable commodity, separate from split yarn or monofilament yarn, and its production had to be entered in the RG-1 register; the confiscation of the seized yarn was therefore upheld. The alleged clandestine removals were not established on the material relied upon, so the duty demand failed. The extended-period notice was also found defective for non-compliance with the statutory limitation requirements, and the consequential penalty was set aside, while the confiscation and redemption fine were sustained.

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Issues: (i) Whether mother yarn or multi-filament yarn was excisable and required to be entered in the RG-1 register; and (ii) whether the demand of duty based on alleged clandestine clearances was sustainable, including on limitation.

Issue (i): Whether mother yarn or multi-filament yarn was excisable and required to be entered in the RG-1 register.

Analysis: The Tribunal followed its earlier decision in the assessee's own case and held that mother yarn was a distinct commodity from split yarn or monofilament yarn and was excisable. Since both the mother yarn and single yarn were treated as separate dutiable goods under the tariff scheme, their production had to be recorded in the RG-1 register when manufactured. The plea that mother yarn was merely in-process material and therefore outside the register requirement was rejected.

Conclusion: The issue was decided against the assessee and the confiscation of the seized yarn was upheld.

Issue (ii): Whether the demand of duty based on alleged clandestine clearances was sustainable, including on limitation.

Analysis: The alleged clandestine removals were inferred from seized packing slips, but the Tribunal found that the material on record did not establish clandestine clearance of yarn from the factory. The evidence and the Collector's reasoning were treated as insufficient to support the demand. Independently, the Tribunal also held that the show cause notice invoking the extended period, having been signed by the Superintendent after the amendment of section 11A, was defective and could not sustain the demand.

Conclusion: The demand of duty was held unsustainable and the limitation objection was accepted in favour of the assessee.

Final Conclusion: The appeal succeeded only in part: the duty demand and consequential penalty were set aside, while the confiscation of the seized yarn and the redemption fine were sustained.

Ratio Decidendi: Where the record does not establish clandestine removal, a duty demand cannot stand, and a show cause notice invoking the extended period must conform to the statutory requirements governing limitation.

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