TaxTMI 
TaxTMI 
2015 (1) TMI 889
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.... used captively for manufacture of grey fabrics which are subsequently processed. The dispute in this case is about the assessable value of the spun yarn at the spindle stage. The yarn before being used for manufacture of fabrics, is subjected to the processes of winding, reeling, warping, doubling/multifolding, dyeing, sizing, beaming, etc. The period of dispute in the appeal Nos. E/300-305/2005 and No. E/3185/2005 is from 1995-1996 to 2000-2001 and in respect of appeal No. E/556/2008 is also from 1995-1996 to 2000-2001. Since during the period of dispute, there were no factory gate sales of the yarn and the cost of comparable goods manufactured by other manufacturers was also not available, the appellant during period up to 30-6-2000, were paying duty on the yarn cleared for captive use on the value determined on the basis of cost data in terms of Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975 and w.e.f. 1-7-2000 were paying duty in terms of Rule 8 of the Central Excise (Valuation) Rules, 2000. The Department was of the view that since the appellant after RG-1 stage i.e. spindle stage, have subjected the yarn to the processes of winding, reeling, warping, doubling/mu....
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....inst this order of the Commissioner, the appeal No. E/300-305/2005-EX (DB) has been filed by the appellant company. 1.3 The above order of the Commissioner was examined by the Committee of Chief Commissioners for its legality or propriety. The Committee was of the view that the Commissioner's order setting aside the duty demand on the cost of winding [transferring the yarn from bobbins (spindle stage) on cones], cheese winding (transferring the yarn from bobbins or cones to a cylindrical tube) and singeing (removing protruding end of fibres by burning by passing the yarn through gas flame or heated element to make the yarn smoother and more uniform) is not correct, as yarn has to be subjected to these processes prior to doubling/multifolding and the cost of these process, is part of the cost of doubling/multifolding. The Committee was also of the view that penalty of Rs. 10 lakhs imposed on the appellant company also needs to be enhanced accordingly. The Commissioner in pursuance of the order of the Committee under Section 35E(1) of the Central Excise Act, 1944 has filed appeal No. E/3185/2008-EX on the above grounds. 1.4 The show cause notice dated 28-1-1997 for du....
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.... w.e.f. 16-3-1995 the process of winding, sizing, beaming, warping, or reeling of cotton yarn did not amount to manufacture and hence there is no question of adding the value of winding w.e.f. 16-3-1995, that there was similar Chapter note in Chapter 55 in respect of spun yarn of man-made fibre, that the Apex Court in the case of CCE, Jaipur v. Banswara Syntex Ltd. reported in 1996 (88) E.L.T. 645 (S.C.) has held that doubling or multifolding of yarn does not bring into existence a new excisable product and, as such, does not amount to manufacture, that same view has been taken by the Apex Court in the case of J.K. Spinning and Weaving Mills Ltd. v. Union of India reported in 1987 (32) E.L.T. 234 (S.C.) and CCE, Mumbai-V v. Swastik Rayon Processors reported in 2007 (209) E.L.T. 163 (S.C.), that in view of this, the Commissioner's order confirming duty demand by loading the value of the yarn at the spindle stage with the value of doubling/multifolding yarn prior to its use in weaving is not sustainable, that in terms of exemption Notification No. 35/1995-C.E., dated 16-3-1995, doubled/multifolded yarn including cabled yarn, other than sewing thread falling under Chapter 51, 52, 54 o....
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.... of winding/cheese winding and singeing and doubling/multifolding prior to being used captively for manufacture of fabrics; and (b) on the man-made spun yarn of Chapter 55 purchased from outside which had been subjected to the above processes before being used in the manufacture of fabrics. 6.1 In the appeal No. E/556/2008, the duty demand of Rs. 1,79,269/- is for the period from 16-3-1995 to 31-3-1995 on the man-made spun yarn which had been subjected to the process of winding before being used for weaving of fabrics within the factory. 6.2 The demands have been raised on the basis that the processes of winding/reeling, warping, doubling/multifolding, dyeing, sizing, beaming, etc., amounts to manufacture and therefore when single ply yarn manufactured in the factory or purchased from outside is subjected to these processes, the duty would be chargeable on the yarn subjected to these processes. In respect of the yarn manufactured in the factory, the duty has been demanded on the quantity of the yarn at the spindle stage i.e. on the quantity of the yarn on the bobbins, which had been accounted for in the RG-1 register, but on the value incl....
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....anufacture. We find that during the period prior to 16-3-1995 there was Chapter Note 1 to Chapter 52 which provided that in relation to the products of Headings 52.03 and 52.04, sizing, beaming, warping, wrapping, winding, reeling or any one or more of these processes or conversion of any form of the said product to the another form of such product shall amount to manufacture and the duty on the sized yarn shall be charged on the basis of its weight before sizing and there was similar chapter note in respect of spun yarn, man-made staple fibres in Chapter 55. However, w.e.f. 16-3-1995 Chapter Note 1 of Chapter 52 was replaced by a new note providing that in relation to the products of Headings 52.04, 52.05 and 52.06 the process of printing, bleaching, mercerizing, twisting, texturising, doubling, multifolding, cabling or any other process or any one or more of these processes or the conversion of any form of the said product into another form of such product shall amount to manufacture. Similar amendment was made w.e.f. 16-3-1995 in the corresponding Chapter Note of Chapter 55. Thus, w.e.f. 16-3-1995, the process of winding i.e. transferring the yarn from bobbins to cones was no lo....