TaxTMI 
TaxTMI 
1995 (4) TMI 133
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....ken the view that such yarn would not be liable to pay any duty while Civil Appeal No. 5408 of 1990 is moved by the assessee against the order of the Tribunal which has taken a contrary view. In order to appreciate the contours of this controversy, it is necessary to note a few relevant facts. 3. There is no dispute that the assessee textile mills in both the sets of appeals are composite textile mills. Composite textile mill is one which contains two departments amongst others, namely, spinning and weaving departments. In the weaving department yarn is manufactured. That yarn is captively consumed in the spinning department of the same mill and ultimately cotton fabric emerges. It is also not in dispute that once yarn is manufactured even for captive consumption in the weaving department, it has to bear excise duty as a commercial commodity is said to have emerged. When this yarn is utilised in the spinning department of the composite mill and fabric is manufactured out of it, on fabric excise duty has to be paid as per the tariff rate operating at the relevant time. The dispute in the present case arose because from 18-6-1977 there was in operation an exemption notificati....
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....em I of Item No. 19 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944) and specified in column (2) of the Table hereto annexed (hereafter in this notification referred to as the "Table") from so much of the duty of excise leviable thereon as is in excess of the duty specified in the corresponding entry in column (3) thereto. TABLE S. No. Description Rate of duty (1) (2) (3) 1. Cotton fabrics in which the ave-rage count of yarn is 41s or more. fifteen per cent ad valorem. 2. Cotton fabrics (other than those in which the average count of yarn is 41s or more), - does not exceed four rupees two per cent ad valorem. &nbs....
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....nufactured prior to 15-7-1977 and removed for captive consumption and utilised in production of fabrics; and (2) cotton yarn already manufactured prior to 15-7-1977 but removed for captive consumption from and after 15-7-1977 for manufacturing of fabrics. This is clearly discernible from the words "where cotton fabrics have been produced in a composite mill or are produced therein and in the production of such cotton fabrics....... cotton yarn........... on which no duty of excise was paid prior to the 15th day of July, 1977, was or is used..." The dispute centres around the cotton yarn in the first category. In Civil Appeals 103 and 104 of 1988, the Tribunal has taken the view following the decisions of the Bombay High Court in Sriram Mills Ltd. v. Union of India (1982 E.L.T. 457) and the Gujarat High Court in Aryodaya Spinning and Weaving Company Ltd. v. Union of India (1981 E.L.T. 274), that when cotton yarn is manufactured prior to 15-7-1977 and is removed for captive consumption and used by the composite textile mill in manufacturing fabric prior to that date no excise duty can be charged thereon even if the fabric is manufactured out of it after 15-7-1977. In Civil Appeal 540....
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....modity; Whether in a continuous process or otherwise, in such place or any premises appurtenant thereto, specified by the Collector under sub-rule (1), shall be deemed to have been removed from such place or premises immediately before such consumption or utilisation." A conjoint reading of Rule 9(1) and Explanation makes it clear that if a manufactured item covered by the charge of excise duty by the charging provisions of the Central Excise Act is captivity consumed, it would amount to removal of such manufactured item. Consequently once the yarn is manufactured in the weaving department of the composite textile mill and is taken to the spinning department for being captively utilised by way of consumption in spinning department, and gets consumed, it is deemed to have been removed within the meaning of Rule 9(1). Once that happens, the liability of such manufactured yarn to pay excise duty at the then prevalent rate of duty is crystalised. Thereafter, the question as to when subsequently the fabric is manufactured or emerges or is removed from factory gate becomes irrelevant for the purpose of deciding the question of liability of excise duty on such captively consumed yar....