Porritts and Spencer (Asia) Ltd. Vs. Collector of Central Excise - Court Judgment

Excerpt:
1. these three appeals involve a common point of dispute, arise out of a common order-in-appeal and pertain to the same appellants. these were, therefore, heard together and are being disposed of by this common order.2. the main point of dispute involved in these three appeals is whether the multifold yarn or doubled yarn prepared by the appellants out of duty-paid cotton yarn and nylon filament yarn was liable to duty again under item 18a/18e of the central excise tariff or not. the period relevant for these appeals is from 1.3.1971 to 31.10.1976.3. it is the case of the appellants that they are manufacturers of paper makers cotton dryer felts. they buy duty-paid coarse cotton yarn and duty-paid nylon filament yarn from other producing mills. they take a few strands of cotton yarn and.....

Judgment:
1. These three appeals involve a common point of dispute, arise out of a common order-in-appeal and pertain to the same appellants. These were, therefore, heard together and are being disposed of by this common order.

2. The main point of dispute involved in these three appeals is whether the multifold yarn or doubled yarn prepared by the appellants out of duty-paid cotton yarn and nylon filament yarn was liable to duty again under Item 18A/18E of the Central Excise Tariff or not. The period relevant for these appeals is from 1.3.1971 to 31.10.1976.

3. It is the case of the appellants that they are manufacturers of paper makers cotton dryer felts. They buy duty-paid coarse cotton yarn and duty-paid nylon filament yarn from other producing mills. They take a few strands of cotton yarn and nylon filament yarn (the number of strands being different varieties of felts) and twist them together on a doubling machine. The resultant product is a multifold yarn having cotton yarn and nylon filament yarn as its constituents. They use this multifold yarn entirely in their own factory for weaving of felts. At this stage, it would be useful to set out below the material dates and the turn of events in regard to these three appeals:9.11.71 Visit by Central Excise officers to the appellants' factory. The appellants produced an L-4 licence which they possessed for doub- ling of yarn.18.2.72 The Assistant Collector issued a show cause notice demanding differential duty of Rs. 8,739.78 under Rule 9(2) of the Central Excise Rules, 1944 on the cotton yarn consumed by the appellants as a composite mill. The authorities classified the appellants under the category of a composite mill on the ground that they were engaged in doubling of yarn, weaving of fabrics (felts) and processing of those fabrics. The show cause notice did not specify the period for which the duty was demanded. The notice was based on exemption Notification No. 53/69-CE dated 1.3.1969 which fixed various effective rates of duty for different categories of cotton yarn.26.2.72 The appellants sent their reply to the show cause notice maintaining that the felts manufactured by them were not cotton fabrics as held by the Gujarat High Court, that they were only washing and drying the felts on steam cylinders which did not amount to processing, that doubling was not the same thing as twisting, that doubled yarn prepared by them for weaving of felts was not a cotton twist since the appellants gave only four or five twists to the yarn in the course of doubling process and that, in the consequence, they were not a composite mill.17.3.72 Item 18E was introduced in the Central Excise Tariff by the Finance Bill of 1972. The Item read as under: 18E Yarn, all sorts, not elsewhere specified, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power and containing any two or more of the following fibres, namely.- (iv) jute (including Bimlipatam jute or mesta fibre); and (v) man-made fibres.20.7.72 Pending adjudication of the dispute, the Superintendent of Central Excise asked the appellants to pay duty on twisting of yarn and thread falling under Item 18A CET read with exemption Notfn. No. 53/69-CE dated 1.3.1969.29.7.72 The appellants sought an opportunity of being heard before the Superintendent's order of 20.7.1972 was implemented.

Separately, the appellants appealed to the Appellate Collector against the Superintendent's order.1.2.73 The Appellate Collector disposed of the appellants' appeal holding that the Superintendent had not passed any appealable order.1.3.73 Item 18E CET was amended to read as under: 18E. Yarn, all sorts, not elsewhere specified, in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power.

Simultaneously Notification No. 50/73-CE dated 1.3.1973 was issued whereby the Central Government fully exempted "yarn, all sorts, other than the yarn containing any two or more of the fibres" specified in the notification, Cotton and, man-made fibres were two, among others, of the fibres specified in the notification. These changes made on 1.3.1973 were a part of the Budget proposals of that year. The Explanatory Memorandum on the Finance Bill, 1973, prepared for the information of the Members of Parliament, stated as under in regard to the above changes: Tariff description has been amended as a measure of rationalisation to include all types of yarn not elsewhere specified. However, the duty liability has been restricted by.

Notification to blended yarn containing any two or more fibres of cotton, silk, wool, jute, man-made fibres, flax and Ramie.29.10.74 The Superintendent issued a letter saying that doubling of duty- paid staple fibre yarn and cotton yarn resulted in the manufacture ofa new product falling under Item 18E and directed the appellants to pay duty, maintain records and get the classification list approved.22.11.74 The appellants replied saying that Item 18E applied only to yarn manufactured out of fibres (placing reliance on the language of exemption Notification No. 50/73-CE dated 1.3.1973).25.11.74 The Superintendent informed the appellants by a letter that it was beyond his jurisdiction to re-consider the instructions based on orders received from "higher levels" and that non-compliance by the appellants attracted penal action under the rules. The Superintendent asked for particulars of clearances of multifold yarn from 1.3.1971.2.1.75 The appellants wrote to the Assistant Collector reiterating their objections against the levy under Item 18E, adding that the goods were tailor-made for each particular customer, that the multi-folded product was used captively in an integrated process and was not otherwise saleable.7.1.75 The appellants appealed to the Appellate Collector against the Superintendent's directive.7.2.75 In response to the appellants' letter dated 2.1.1975 addressed to the Assistant Collector, the Superintendent wrote to the appellants that they must comply with instructions based on the Government of India's directive and must furnish particulars of past clearances already asked for.20.2.75 The appellants asked the Superintendent to await the orders of the Assistant Collector and the Appellate Collector.24.7.75 The appellants supplied some figures to the Superintendent and complained of denial of a personal hearing. They endorsed a copy of their letter to the29.7.75 The appellants wrote to the Assistant Collector, gave descriptions of three categories of multifold yarn manufactured by them and stated their objection that multifolding of duty-paid yarns was not excisable, thattwo of the categories of their multifold yarn which contained 90% and 75%,or more, respectively, by weight of cotton yarn, at least did not fall under Item 18E. They requested for a personal hearing in view of the repeated directives being16.9.75 The Assistant Collector addressed a letter to the appellants saying that the offence case against them would now be adjudicated by the Assistant Collector and asked the appellants to submit any further evidence which they desired.26.9.75 The appellants replied, drawing attention to the Department's original stand of assessing the goods under Item 18A (vide show cause notice dated 18.2.72) and the now changed stand of assessing the goods under Item 18E. They reiterated22.12.75 The Assistant Collector asked the appellants to comply with the instructions and to pay duty under protest if they felt aggrieved. This was followed by a letter from the Superintendent asking the appeltants to submit a classification9.1.76 The appellants submitted the classification list dated 7.1.76 showing multifold yarn in the category of non-excisable goods.10.2.76 The Superintendent returned the classification list to the appellants asking them to fill in particulars of all excisable goods produced or manufactured by them at Serial No. 4 (which the appellants had left blank).

In view of their stand on the question of classification, the appellants did not comply with the Superintendent's order and did not re-submit the classification19.2.76 The appellants had expressed the view before the Appellate Collector that the subject multifold yarn should be classified as cotton yarn since it contained more than 90% by weight of cotton yarn. The Appellate Collector held that the appeal before him was premature as the issue of dutiability of the appellants' products had yet to be decided by the local officers. The Appellate Collector advised the26.7.76 The appellants were heard by the adjudicating Deputy Collector. They stated that "the Department had changed stand by issuing a revised show causenotice for doubling of yarn under Item 18E". They reiterated that (i) multifolding was a part of the continuous process of manufacture of felts and (ii) a separate product did not come into being independently because it was not sold,and8.9.76 The Deputy Collector passed his order-in-original holding that the show cause notice was revised from March, 1972 because of Tariff change (introduction of Item 18E on 17.3.1972), multifold yarn manufactured by the appellants was anew product liable to duty under Item 18A before March, 1972 and under Iteml8E thereafter, the their argument of "no sale" was not tenable and that the appellants had contravened the various Rules, including Rule 9(1). The Deputy Collector imposed penalty of Rs. 500/-on the appellants under Rule 173Q, demanded duty on past clearances of multifold yarn and asked the appellants to observe all the Rules in future.29.9.76 The appellants submitted a classification list under protest to the30.10.76 Superintendent, asked for provisional assessment under Rule 9-B, expressed their intention to go in appeal and for that asked for an appealable order on the15.11.76 The Superintendent gave his orders on classification list No. 1/76 and2/76.

In C.L. 1/76, multifold yarn having 94% cotton con-teat was classifiedunder Item 18A read with exemption Notification No. 53/69 dated 1.3.1969. In C.L.2/76, four varieties having synthetic content 25% or more were classified under Item 18E read with exemption Notification No. 30/75-CE dated 1.3.1975.18.11.76 Demand for Central Excise duty amounting to Rs. 29,70,835.20 was sent to the appellants pursuant to the Deputy Collector's order-in-original dated 8.9.1976.

This demand covered the period from 1.3.1971 to 31.10.1976.26.11.76 The appellants disputed the calculations of the demand based on synthetic content, pointed out certain arithmetical errors and claimed about 2% process The appellants went in appeal to the Appellate Collector against the Superintendent's order on C.L. 1/76 dated 15.11.1976.4.12,76 The appellants' appeal to the Appellate Collector against the Deputy Collector's order-in-original dated 8 9.1976 and against the Superintendent's order dated 15.11.76 on C.Ls. 1/76 and 2/76.18.10.77 The Appellate Collector passed the impugned combined order-in-appeal in the three inter-connected appeals. He held that with the introduction of Item 18E, all obligations and liabilities of the appellants in respect of the subject multifold product were automatically transferred from Item 18 or 18A to Item 18Eand that lack of a formal show cause notice for the change of Tariff items was no bar the decision on classification, more so in view of the Superintendent's letter dated 29.10.1974. The Appellate Collector upheld the Deputy Collector's order-in-original as well as the orders passed on the two classification lists in the following (i) Up to February, 1972, classification of doubled yarn was upheld under Item 18A on the ground of predominance of cotton content.

(ii) From March, 1972, classification of doubled yarn was upheld underItem 18E on the ground that it was a new product which was neither cotton yarn nor The Appellate Collector held further that this was not a case of non-levy/short levy of duty due to inadvertence, error, etc., under Rule 10 and that Rule 9(1) had been violated by the appellants. The Appellate Collector, however,set aside the penalty imposed on the appellants.6.12.77 The appellants filed a revision application to the Government of India which now stands transferred to this Tribunal and forms the subject appeal.

4. During the hearing before us, spread over three days, that appellants made the following arguments: (i) Doubling of yarn did not involve manufacture as the doubled yarn or multifold yarn was not a new product. They relied on the Bombay High Court judgment in the case of The Piramal Spinning & Weaving Mills Limited (Misc. Petition No. 520 of 1976)(1982 E.L.T. 145 Bom.) (1982 ECR 40D). When the contrary decisions of this Tribunal in the cases of Messrs. Aditya Mills (1983 E.L.T. 1853 (C.E.G.A.T) and Messrs. General Industrial Society (1983 E.L.T. 2497 (C.E.G.A.T) (1983 ECR 2028D) were brought to their notice, they stated that doubled yarns manufactured by M/s. Aditya Mills and M/s. General Industrial Society were sold in the market while the doubled yarn produced by the appellants was entirely used by the appellants themselves in the weaving of felts. They maintained that their multifold yarn was not marketed and not marketable.

(ii) Up to 16.3.1972, that is before the introduction of Tariff Item 18E, blended yarn was not covered by any entry of the Central Excise Tariff. For this they relied on the judgment of the Gujarat High Court in the case of The Ahmedabad Manufacturing & Calico Pig. Co.

Ltd. (Special Civil Application No. 1058 of 1972) (1976 Cen-Cus 25D).

(iii) With effect from 17.3.1972, the newly introduced Item 18E also did not cover their multifold yarn because this Tariff Item was applicable to yarns spun from blended fibres. Though the Finance Act of 1973 dropped the word "fibres" from Item 18E, the position did not alter in substance because simultaneously exemption Notification No. 50/73 CE dated 1.3.73 was issued which exempted yarn, all sorts, other than yarns containing any two or more of the fibres specified in the notification. Thus, the concept of fibres as the raw material for the yarn, though omitted from Item 18E, was, in effect, retained through this notification. The appellants stated that their plea was borne out by what the Government themselves stated in the Explanatory Memorandum to the Finance Bill, 1973. They also relied on the Madras High Court judgment in the case of Madura Coats Limited (1981 ECR 415D-Madras) It was put to the appellants that the definitions laid down by the Indian Standards Institution stated that filament yarn was also composed of fibre, with the only difference that it was continuous or in length while staple fibre was discontinuous or cut to short lengths. The appellants stated that this may be the position as per the I.S.I, literature but so far as the Central Excise Tariff was concerned, Item 18 made a distinction between filament yarn and fibre.

(iv) Without prejudice to their above arguments, the appellants maintained that if at all their multifold yarn was dutiable, it could be so only i under the residuary Item 68 (Goods not elsewhere specified) of the Tariff with effect from 1.3.1975, that is the date on which Item 68 was introduced. They cited the tariff advice No. 29/80 issued by the Central Board of Excise and Customs in support of their argument. They added that they were exempt from payment of any duty under Item 68 because they used the multifold yarn within their factory.

(v) No show cause notice was issued to the appellants for levy of duty under Item 18E. The letter dated 29.10.74 of the Superintendent was just a direction to them to maintain accounts; it was not a show cause notice. Further, this letter stated that the process of doubling of duty-paid staple fibre yarn and duty paid cotton yarn by the appellants resulted in the manufacture of a new product classifiable under Tariff Item 18E. The appellants stated that they were not manufacturing any doubled yarn out of staple fibre yarn and cotton yarn. This letter of the Superintendent was, therefore, based on factually wrong premises. The only show cause notice issued to the appellants was on 18.2.1972 which demanded differential duty of only Rs. 8,739.78 with reference to Item 18A of the Tariff. However, after adjudication by the Deputy Collector, the appellants were called upon to pay the duty of Rs. 29,70,835.20 with reference to a different item of" the Tariff (Item 18E) without a revised show cause notice having been given to them. The demand made under rule 9(2) was not sustainable on the further ground that the facts were within the knowledge of the departmental officers as is evident from the appellants' L4 licence, visit of the officers to the appellants' factory on 9.11.71 and the Asstt. Collector's show cause notice dated 18.2.1972.

Besides, the appellants brought in a new point for the first time saying that there were calculation errors in computing the demand and that addition of 10 per cent to the weight of the yarn was made by the officers arbitrarily to take care of the process waste. The appellants contended that on the contrary there should be some deduction from weight to take care of the waste during the doubling process.

5. The Department's Representative made the following points in reply to the appellants' arguments: (i) Placing reliance on the orders of the Bench in the case of M/s.

Aditya Mills and M/s. General Industrial Society, the Department's Representative asserted that the doubled yarn manufactured by the appellants was a new product. The fact that the appellants used their doubled yarn captively and did not sell it made no difference in view of the law on this point having been settled by the Supreme Court judgments in the case of Delhi Cloth and General Mills Company Limited and Ors. 1977 E.L.T. (J. 199) : ECR C 520 S.C. and South Bihar Sugar Mills Ltd. and Anr. 1978 E.L.T. (J. 336) : (ECR C 257 S.C). He further relied on the Allahabad High Court judgment in the case of Union Carbide India Limited 1978 E.L.T. (J. 1) to say that the doubled yarn and the felts manufactured by the appellants were specialised monopoly products and the test of general marketability could not be applied to their doubled yarn to decide whether it was goods or not. He stated that the Bombay High Court judgment in Piramal case was based on some old judgments of the Supreme Court under the Sales Tax law and if the later Supreme Court judgments in the D.C.M. case (Supra) and the South Bihar Sugar Mills1 case (Supra) had been cited before the Bombay High Court, the outcome might have been different. He stated that this Tribunal had not agreed with the Bombay High Court judgment in the General Industrial Society's case and in their order relating to Aditya Mills. The Madras High Court judgment in Madura Coat's case related to consideration of the question of job work which is not relevant to the present appeals. Moreover, this judgment contained no reasoning.

(ii) Although the Gujarat High Court had held in the Calico case that blended yarn was not liable to duty before 17.3.1972 and even though this Tribunal had also accepted this position in their order in the case of Near Era Hindustan Woollen Mills 1983 E.L.T. 1015 (C.E.G.A.T.) : (1983 ECR 1049D Cegat), the Department had gone in appeal against the Gujarat High Court judgment and the said judgment was, therefore, not binding on the Department in view of the authority reported at .

(iii) Item 18E as introduced on 17.3.1972 covered yarn, all sorts, not elsewhere specified and till 17.6.1977 the entry did not say that it applied to spun yarn or blended yarn only. The word "spun" was added in the entry only on 18.6.77. Therefore, during the period from 17.3.1972 to 17.6.1977, the entry covered all types of mixed yarn and blended yarn which did not fall under the other yarn entries such as items 18, 18A, 18B etc.

(iv) In view of Item 18E being more specific to cover the subject multifold yarn, classification under the residuary Item 68 could not be made. The appellants' reliance on the Tariff Advice No. 29/80 and the Cochin Collectorate Trade Notice No. 17/83 was misplaced as this Tariff Advice as well as the Trade Notice considered classification of filament doubled yarn after amendment to Item 18E on 18.6.1977 when Item 18E was confined to spun yarn and hence did not cover filament doubled yarn. The material period to which the present appeals related was all before 18.6.1977.

(v) Rule 9(2) had been correctly applied in the appellants' case since there had been no prior assessment of their multifold yarn.

The original show cause notice dated 18.2.1972 was issued within the limitation period of six months as laid down under rule 10 also.

Even assuming that rule 10 applied and not rule 9(2), citing of a wrong rule in the show cause notice did not invalidate the demand because the Assistant Collector had the power to issue a show cause notice under either of these two rules. No doubt, there was no formal revised show cause notice issued as such, after introduction of Item 18E, but the Superintendent's letter dated 29.10.1974 served the purpose of a revised show cause notice in substance and the subsequent correspondence would show that the appellants too understood it correctly. The words "duty-paid staple fibre yarn and duty-paid cotton yarn" mentioned in the Superintendent's letter dated 29.10.74 were an inadvertent error. The correct words should have been "duty-paid nylon filament yarn and duty-paid cotton yarn".

This error did not mislead the appellants as the subsequent correspondence would bear and they correctly understood that what was sought to be done by the Superintendent was to bring their subject multifold yarn under Item 18E instead of the earlier Item 18A. The Department's Representative added that the points regarding process wastage and the alleged calculation errors in the demand had not been gone into by either of the lower authorities and, if thought fit, these points could be remanded to these authorities for examination in the first instance.

6. We have given our earnest consideration to the matter. The first point to be decided is whether the multifold yarn produced by the appellants was 'goods' and whether it was a new product involving 'manufacture'. The appellants have relied heavily on the Single Judge Judgment of the Bombay High Court in Piramal case. In that case, the appellant mil] was producing twinkle yarn by intertwining strands of cotton yarn and nylon filament yarn. The mill used the resultant twinkle yarn entirely in weaving of fibres in its factory. The Bombay High Court held that since the said twinkle yarn was not being marketed and hence was not known to trade circles, it was not a new product involving the process of manufacture. The appellants say that the process of multifolding cotton yarn and nylon filament yarn adopted by them is also unique to them and they use the resultant multifold yarn entirely in weaving of felts which is a specialised product of theirs'.

They also stressed the point that no part of their multifold yarn was being sold and hence this yarn was not known in the market.

7. The basic principles for classification of goods for the purpose of central excise levy have been laid down by the two Supreme Court judgments in the case of M/s. D.C.M. (ibid) and M/s. South Bihar Sugar Mills (ibid). To quote from the D.C.M. judgment- Excise duty is on the manufacture of goods and not on the sale. Mr.

Pathak is therefore right in his contention that the fact that the substance produced by them at an intermediate stage is not put in the market would not make any difference. If from the raw material has been brought into existence a new substance by the application of processes one or more of which are with the aid of power and that substance is the same as "refined oil" as known to the market an excise duty may be leviable under Item 23 (the present Item 12).

That the point that the goods were not sold in the market was immaterial was clarified further in the South Bihar Sugar Mills' (ECRC 257 S.C.) judgment as under: At the same time the duty being on manufacture and not on sale the mere fact that kiln gas generated by these concerns is not actually sold would not make any difference if what they generate and use in their manufacturing processes is carbon dioxide.

As against the Single Judge judgment of the Bombay High Court in Piramal case, the Division Bench of the Allahabad High Court have taken a contrary view in the Union Carbide case 1978 E L.T. (J. 1).The Allahabad High Court has held that the test of general marketability is not sound as it would fail in the case of a monopoly product and for such a product the relevant entry would become nugatory. We respectfully submit before the principles laid down by the Supreme Court and the Division Bench of the Allahabad High Court. The appellants manufacture virtually a monopoly product in this country-paper makers cotton dryer felts. The multifold yarn which they prepare is for use in the weaving of this monopoly product. The multifold yarn being of use to them alone, it cannot be expected that it would be traded in the open market. The multifold yarn is a very valuable commodity produced for a specialised product. Going by the principles laid down by the Supreme Court, it cannot cease to be goods just because it is not sold. And following further the principle laid down by the Allahabad High Court, the status of a monopoly product cannot be judged by the test of general marketability. The appellants cannot manufacture their felts without this yarn. If they themselves were not producing the said multifold yarn, they would have to buy it from some one else. Just because the appellants themselves produce this yarn for further captive use, it does not stand to reason to say that the yarn should not attract the levy. We, therefore, hold that the subject multifold yarn produced by the appellants is goods. As regards the question whether it is a new product, it is quite evident that the subject multifold yarn is neither cotton yarn nor nylon yaw but a mixed yarn consisting of both of them. The mixed yarn or multifold yarn has separate strength, properties and use of its own, distinct from those of its constituent yarns, that is, cotton yarn and nylon yarn, taken individually. The process of doubling or twisting which brings into existence the multifold yarn as a new product has, therefore, to be treated as a process of manufacture. In saying so, we reiterate the ratio of our order in the case of Aditya Mills 1983 E.L.T. 1853 (CE.G.A.T.) 8. Since we have held that the subject multifold yarn is neither cotton yarn nor nylon yarn but a new product in the nature of a mixed yarn and since there was no entry in the Central Excise Tariff till 16.3.1972 to cover such a mixed yarn, we hold that the subject multifold yarn was not taxable till this date. This was our conclusion in the New Era case also 1983 E.L.T. 1015 (CEGAT), 1983 ECR 1049D Cegat and we reiterate it. Accordingly, we set aside that part of the demand which sought to re-tax the subject multifold yarn as cotton yarn under Item 18A till 16.3.1972.

9. The new Entry 18E introduced on 17.3.1972 covered yarn, all sorts, not elsewhere specified. Since the subject multifold yarn is a yarn and like other yarns is used in the process of weaving and since it was not covered by any other Tariff entry relating to yarn, it squarely fell under Item 18E. While this is the position regarding classification, we find that even though all the facts were within the knowledge of the Central Excise officers, as evident from the central excise licence for doubling of yarn possessed by the appellants, the officers' visit to the appellants' factory on 9.11.1971, the Asstt. Collector's show cause notice dated 18,2.1972 and the appellants' reply thereto dated 26.2.1972, the Department made no attempt to bring the subject yarn under the newly introduced Item 18E. On the contrary, even four months after the introduction of Item 18E through the Budget of 1972, the Superintendent addressed a letter to the appellants on 20.7.1972 asking them to pay duty, pending adjudication, on twisting of yarn and thread falling under Item 18A read with Notification No. 53/69-CE dated 1.3.1969, that is, as cotton yarn. This shows that though the officers were well aware of the nature of the multifold yarn manufactured by the appellant, they did not feel that the said yarn was classifiable under Item 18E. The first communication which came from the Department to the appellants and which sought to enforce their liability under Item 18E was the Superintendent's letter dated 29.10.1974. Even this letter contained no demand for the past 2 years or so but only asked the appellants to pay duty, maintain central excise accounts and get a classification list approved. The appellants were informed through this letter for the first time that their process of doubling of yarn resulted in the manufacture of a new product falling under Item 18E. In view of these facts, we find no ground to sustain the demand under Item 18E for the period prior to 29.10.1974 and the demand to that extent is set aside.

10. So far as the period from 29.10.1974 onwards is concerned, we have to consider the appellants' point that Notification No. 50/73-CE dated 1.3.1973 confined the levy to only that yarn falling under Item 18E which contained two or more of the specified fibres. Their emphasis is on the word "fibres" occurring in the notification. The same word occurred in the description of the tariff item No. 18E itself also during the period from 17.3.1972 to 28.2.1973. They have also invited our attention to an Explanatory Note on the Budget proposals of 1973 prepared by the Government for the information of the Hon'ble Members of Parliament. This Note stated that though the tariff description of Item 18E had been amended to include all types of yarn not elsewhere specified, through the exemption notification the duty liability had been restricted to blended yarn containing two or more specified fibres. The appellants quoted from Textile Dictionaries to say that blended yarn was made by mixing two or more fibres before spinning.

They contended that since no mixing of fibres before spinning was involved in the case of their multifold yarn, it was not a blended yarn and hence exempt under the notification. We find that the notification itself does not use the expression "blended yarn". The only stipulation in the notification was that the yarn should contain two or more of the specified fibres. Cotton and man-made fibres were two such specified fibres. The appellants sought to distinguish between filament yarn and fibre with reference to the two separate sub-entries under Item 18 of the Tariff. On careful consideration of the matter, we find that there is no force in their plea. The position is authoritatively clarified in the Glossary of Textile Terms Relating To Man-Made Fibre and Fabric Industry (IS : 1324-1966) prepared by the Indian Standards Institute.

We quote from the said book: 1.1 This standard prescribes definitions of terms commonly used in the man-made fibre and fabric industry. Part I of the standard contains the definitions of terms relating to man-made fibres or filaments and Part 2 contains the definitions of terms relating to man-made fibre fabrics.

Yarn--A continuous strand of textile fibres or filaments with or without twist suitable for plying, knitting, braiding, weaving, or otherwise intertwining to form a textile and product. Yarn occurs in the following forms: (a) Spun yarn--A yarn composed of fibres (short length, or staple) twisted together, (b) Filament yarn--A yarn composed of continuous filaments assembled with or without twist; (d) A narrow strip of materials, such as paper, cellophane or metal foil, with or without twist.

Note-Varieties include single yarn, plied yarn, cabled yarn, cord, thread, fancy yarn, etc.

(ii) filament is a continuous fibre or a fibre of indefinite length ; in contradistinction to that, staple fibre is a short fibre cut to staple lengths. It is also known as discontinuous fibre ; and The position is further corroborated by the Chapter headings to Chapters 51 and 56 of the Customs Tariff Act, 1975, which in turn is based on the internationally adopted Customs Cooperation Council Nomenclature. We quote from the Customs Tariff Act: Thus, unless the word "fibre" is qualified by the expression continuous, discontinuous or staple, it has to be considered to encompass both continuous and discontinuous varieties, that is, filament as well as staple fibre. The word fibre used in the notification (and so also in the tariff description of Item 18E before 1.3.1973) was an unqualified one. Further, the tariff as well as the notification did not say that only blended yarn was taxable. That being the statutory position, multifold yarn consisting of cotton yarn and nylon filament yarn squarely fell within the taxable category under Item 18E. The Explanatory Note prepared for the information of the Hon'ble Members of Parliament was not a statutory provision and it cannot have the effect of altering the scope of the tariff item and the exemption notification. We understand that such Explanatory Notes are, by their very nature, couched in a simple language, devoid of all technical and legal jargon, with the idea that they should be easily understandable. When we see the matter in this background, it would become clear that the expression "blended yarn" was used in the Explanatory Note in a generic sense. It was hardly the occasion to explain the niceties of the terms "blended yarn" and "mixed yarn". The Department's Representative is right that such distinction became relevant only after amendment of Item 18E on 18.6.1977 when the word "spun" was added to the tariff description. No doubt, as the appellants say, the Central Excise Tariff is divided into two separate sub-items for man-made fibres and man-made filament yarns. But, as would be evident from the Tariff of 1984-85, that has been done for the purpose of having a separate duty structure for spinnable fibres and for filament yarn. It does not prove that filament yarn is not composed of fibre.

11. The next point of the appellants which we have to consider is the question of limitation. Since we have already set aside the demand relating to the period prior to 29.10.1974, the question whether 9(2) applied or rule 10 applied no longer survives. On and from 29.10.1974, the appellants were clearly put on notice in respect of their liability arising under Item 18E.I This is amply borne out by the multitude of letters exchanged between the Department and the appellants from this date onwards till the adjudication of the matter by the Deputy Collector. We agree with the Department's Representative that the error of mentioning "staple fibre yarn" instead of nylon filament yarn in the Superintendent's letter dated 29.10.1974 did not in any way have the effect of misleading the appellants. We, therefore, uphold in principle the demand under Item 18E for the period on and from 29.10.1974.

12. We also agree with the Department's Representative that the fresh points of fact regarding calculation errors in the demand and process wastage, which were not raised by the appellants before the lower authorities, cannot be gone into by us. The appellants are at liberty to take up these points with the appropriate lower authority in the first instance. Subject to this observation, we uphold the classification of the appellants multifold yarn under Item 18E during the relevant period and confirm the demand raised against them in so far as it relates to the period from 29.10.1974 onwards. The three appeals are disposed of accordingly.