Central Excise - MMF - Assessment of POY and Textured Yara - Review of Ministry's Circular No. YARN/2/80-(F. No. 50/1/80-CX.2), dated 24-9-1980 - Central Excise - 6/MMF/90-CX.1

Central Excise - MMF - Assessment of POY and Textured Yara - Review of Ministry's Circular No. YARN/2/80-(F. No. 50/1/80-CX.2), dated 24-9-1980 Circular No. 6/MMF/90-CX.1 Dated 20-2-1990 [From F. No. 50/11/84-CX.2/CX.1] Government of India Central Board of Excise Customs New Delhi Subject : Central Excise - MMF - Assessment of POY and Textured Yara - Review of Ministry's Circular No. YARN/2/80-(F. No. 50/1/80-CX.2), dated 24-9-1980 . Reference Ministry's Circular No. YARN/2/80, dated 24-9-1980 issued from F. No. 50/1/80-CX.2 in which the question of classification of Partially Oriented Yarn (POY) for purposes of classification and collection of countervailing duty was discussed and the Law Ministry's advice on the subject was accepted and communicated to the field formations. According to the Ministry of Law, POY which is imported in raw material or a base yarn subject to drawing and texturising done simultaneously on draw texturising machines. POY of 86 denierage is texturised into 50 denier and one other quality of POY which when imported is of 150 denier is texturised to 75 denier. This is the final stage when the yarn becomes a marketable commodity known to the textile industry. Therefore, it will be just and legal to make this as excisable and impose the tax at this stage only. For the purpose of security or surety to realise the amount of tax which will be imposed finally, bonds may be taken from the manufacturers or the importers at the point of importation. Classification for the purpose of duty is to be made at the final stage only. We presume that the yarn as referred to above to be at final stage is not subject to further stretching or texturising. 2. Subsequently, the matter was again discussed in fte 23rd North Tariff-cum-General Conference held on 17th and 18th December, 1985. In this Conference, it was pointed out that in the Heading 51.01/03 of CCN, POY is treated as yarn except that orientation of the molecules along the length is incomplete in this case. It was also pointed out that POY was being imported/manufactured and sold which goes to indicate its marketability. After discussion, the Conference felt that the POY had the characteristics of man-made filament yarn, in the sense, that it was of polyamide, had a running length and was in the form of a filament. The only difference was that it was partially oriented, in the sense, that the molecules had not been fully oriented. The duty levels were fixed keeping in mind the possible changes in the denierages or texturising at the then existing pattern of production. 3. The High Court of Bombay in Writ Petition No. 176 of 1983 in the case of M/s. Krislon Texturiscd Pvt. Ltd., Bombay v. Union of India Others, inter alia, observed that "CVD must be levied on the goods as they are when they are imported. The goods here as they were when they were imported by the petitioners was POY of 115 deniers. It was liable to that rate of CVD as was provided for in respect of POY of 115 deniers. The rate was, as the petitioners, rightly contended Rs. 61.25 per kg. The court further observed that if excise duty upon texturising is leviable, it must be levied by the Excise Authorities. 4. The said issue was again referred to the Law Ministry for their opinion in F. No. 357/21/83-TRU. The Law Ministry has viewed as follows : "The point for consideration is whether it is possible to charge excise duty on partially oriented yarn (POY) on the basis of its ultimate denier. It appears that POY used to be imported earlier and the importers were paying the lower rate of duty at the higher denierage stage. In the case of such imported POY, countervailing duty was charged on the basis of the ultimate denier of the resultant textured yarn. The point for consideration is not regarding countervailing duty payable on imported POY. The question for consideration relates to indigenously produced POY. It has been mentioned in the referring note that under the Central Excise Law, duty is leviable on goods manufactured in a factory at the time of its removal, whether for captive consumption or for clearance outside. In view of this, it will not be legally in order to collect excise duty on indigeneously produced POY on the basis of its finer denierage as in the case of imported POY. We are inclined to agree with this view. Our previous advice to which a reference has been made in the referring note may be treated as having been modified by this note". 5. The Bombay Bench of the Tribunal in its Order dated 21st August, 1986 No. ED (BOM) A. 155/85 and C.O. (BOM) 15/85, held that POY is an indentifiable item and marketed as such and known as such in the market. It is a goods which falls under Item 18-II(a)(i) of the Central Excise Tariff. The end use for both partially oriented yarn as well as fully oriented polyester yarn is for the manufacture of woven and knitted fabrics for apparels. A distinction between partially oriented and fully oriented polyester filament yarn is that, while in the case of fully oriented yarn the same can directly go in for manufacture of woven and knitted fabrics and it would only be an option to texturise the said yarn. In the case of partially oriented filament yarn, the same is necessarily to be further drawn and simultaneously texturised before it can go in for the manufacture of woven and/or knitted fabrics. This way, partially oriented yarn is semi-finished till it reaches the category of raw material after drawing and texturising." This decision of the Tribunal has been accepted by the Board. 6. In the light of the above decisions and revised Law Ministry's opinion and in view of the fact that partially oriented yarn is a commodity which is being bought and sold in the market both in the domestic tariff area as well as in international trade, it will not be correct to say that excise duty ought to be collected on the basis of its final denierage after drawing and texturising, and not on the basis of its original denierage. 7. In view of the position stated above it is obvious that POY is a fully finished excisable product being bought and sold in the market as such, duty is chargeable on the basis of its own denierage at the take-up stage and not on the basis of the final denierage of the resultant textured yarn which comes into existence after further drawing and texturisation on the draw-cum-texturising machine. Further, if the duty liability in respect of POY has been discharged as per its own denierage before the take-up stage, the resultant textured yarn would be leviable to duty separately unless exempted, like under Notification No. 178/83-CE., irrespective of the fact that the denierage of the resultant textured yarn is less than the POY. 8. Ministry's earlier Circular No. YARN/2/80, dated 24-9-1980 in this regard is modified accordingly. Pending cases may be finalised accordingly.