2. The appellants herein manufactured man-made fabrics for the purpose of manufacturing the fabric they also manufactured the yarn at single stage. They pay duty on yarn at single stage and captively consumed it for doubling and multifolding the said yarn. Thereafter the said double yarn or multifolded yarn is used captively without payment of duty in the manufacture"of man-made fabric.
2. Question which has arisen in this case is whether after having paid the duty on the single yarn, another duty liability arises on the double/multifolded yarn or not. Lower authority has saddled the appellants with another duty liability on the double/multifolded yarn.
The appellants however, have contended that after having paid duty on the single yarn no further duty on double multi-folded yarn arises.
3. Ld. Advocate Shri R.K. Kapoor in support of his case as mentioned above relies on Apex Court's Judgment in the case of CCE, Jaipur v.Banswara Syntex Ltd. .
4. He has relied in particular on para 7 and 8 of the said judgment which are reproduced below: In the present appeal it is contended on behalf of the appellant that the duty was payable when the single ply yarn was manufactured.
It is not in dispute that at the stage of the manufacture of the single ply yarn, there comes into existence an excisable item. The respondent manufactures single ply yarn and it is only thereafter, if required by its customers, that the said yarn is doubled or multifolded. as the need arises. Mere doubling or multifolding of the single yarn which is manufactured does not bring into existence a new product. The single yarn which is manufactured is an excisable item and would be subject to duly upon its manufacture.
8. It is immaterial, in view of Rule 9(1) of the Central Excise Rules and Section 49 of the Act whether the yarn so manufactured is captively consumed or is subjected to any other or further process.
Reference may be made to J.K. Spinning and Weaving Mills Ltd. and Anr. v. Union of India and Ors. where Rules 9 and 49 of the Central Excise Rules, 1944, after they were amended with retrospective effect by Section 51 of the Finance Act, 1982 came up for interpretation. It was held that "in view of the deeming provisions under Explanation to Rules 9 and 49, although the goods which are produced or manufactured at an intermediate stage and, thereafter, consumed or utilised in the integrated process for the manufacture of another commodity is not actually removed, shall be construed and regarded as removed." Dealing with the question of conversion of unsized yarn into sized yarn it was observed at page 250 as follows: In our view, the High Court by the impugned judgment has rightly held that the appellants are not liable to pay any excise duty on the yarn after it is sized for the purpose of weaving the same into fabrics. No distinction can be made between unsized yarn and sized yarn, for the unsized yarn when converted into sized yarn docs not lose its character as yarn.
The same principle would be applicable in the present case. A single ply yarn is first manufactured and thereafter it is doubled or multifolded, depending upon the type of fabric which is ultimately to be woven. The liability to pay excise duty would arise on the manufacture of the single ply yarn and not after the same has been doubled or multifolded. Doubling or multifolding of the same yarn does not bring into existence a new product and no duty is leviable at that stage.
5. As against the above Ld. JDR Shri R.S. Sangia reiterates the findings of the Adjudicating authority which holds that doubling or multifolding of yarn brings into existence another new product calling for a new commodity.
6. We have carefully considered the pleas advanced from both sides. The aforesaid controversy now stands settled in favour of the appellants herein by the Apex Court in judgment of Banswara Syntex Ltd. mentioned above. Consequently, we set aside the impugned order and allow the appeal with consequential relief to the appellants.