TaxTMI 
TaxTMI 
1995 (7) TMI 161
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....resent appeal. 2. The matter relates to the dutiability of cotton yarn, processed in the factory of production, for its clearance as plain (straight) reel hank yarn. A show cause notice was issued on 26-6-1984 to the appellants, and Central Excise duty amounting to Rs. 55,588.48 was demanded on the ground that the yarn of different counts was used for manufacture of twisted yarn in the doubling machine installed in the factory, and no central excise duty was paid thereon, and the goods were cleared under exemption after packing them in the plain (straight) reel hank form. The matter was adjudicated by the AC of C. Ex., Cuttack who confirmed the demand under Sec. 11A of the Central Excises & Salt Act, 1944 (hereinafter referred to as....
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....ntral Excise Rules, 1944 (hereinafter referred to as the 'Rules'), and submitted that yarn removed for captive consumption had to discharge duty liability, and that the yarn was classifiable under erstwhile Item No. 18A of the First Schedule to the CESA, 1944 (hereinafter referred to as the 'Tariff'). The Ld. SDR relied upon the Tribunal decision in the case of Aditya Mills Ltd., Rajasthan v. CCE Jaipur, 1983 (14) E.L.T. 1853 (T), wherein it has been held that doubling and twisting of two different yarns amounted to manufacture of a new product, classifiable under Item No. 68 of the Central Excise Tariff. This Tribunal decision has been confirmed by the Hon. SC as repor....
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....raight) reel hanks, whether single or multiple fold, enjoyed full exemption from Central Excise duty. Such yarn is generally used by the handlooms. Cotton yarn in cones reel hanks, whether single or multiple fold, of count not exceeding 20S (English count) was also exempted, subjected to the condition that such yarn is purchased by a registered handloom cooperative society or any organisation set up or approved by the Government for the development of handlooms, and payment for such yarn is made by cheque drawn by such cooperative society or organisation, as the case may be, on its own bank account. It was provided in proviso (iii) under the aforesaid notification that no further duty was leviable on any yarn which had availed of the exempt....
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.... Court decision in the case of Garware Nylons Ltd. v. UOI, 1980 (6) E.L.T. 249 (Bombay) are extracted below :- "10. The term "yarn" has been considered in a number of cases by different Courts, mainly in connection with Sales Tax. Thus, in Madura Mills Co. Ltd v. Government of Madras and Another, 25 S.T.C. 407 the Madras High Court was required to consider whether cotton tyre cord warp sheet could be considered as cotton yarn under the provisions of the Sales Tax Acts. The Court came to the conclusion that string, cord and rope are merely different species of the same genus, namely, yarn, and held that cord is cotton yarn in the accepted commercial sense. In Commissioner of Sales Tax, U.P. v. Sarin Textile Mills, 35 S.T.C. 634, the ....
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.... and the process required to produce it amounted to `manufacture' within the meaning of clause (17) of S. 2 of the Bombay Sales Tax Act, 1959. A reference may also be made to Deputy Commissioner of Sales Tax v. Pai and Co., 45 S.T.C. p. 58, and State of Tamil Nadu v. Pyare Lal Malhotra - 37 STC p. 319. The classic test for deciding whether there is `manufacture' of a new product or not is laid down in McNicol and Another v. Pinch, 1906 (2) Indian Law Reports K.B., 352. In that case, Darling J. observed that, in a sense, you can only make one thing out of another. The essence of making or manufacturing is that it shall be a different thing from that out of which it is made. In other words, we come back to the same test, namely, whether the p....