TMI Blog2015 (1) TMI 889X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 longer a process of manufacture. In view of this, there is no question of adding the cost of winding by charging duty on the spun yarn at spindle stage. - impugned order, therefore, upholding the duty demand of ₹ 1,79,269/- is not sustainable and the same is liable to be set aside. - Decided in favour of assessee. In terms of the Chapter notes to Chapters 52 and 55 the doubling/multifolding of single ply yarn was to be treated as process of manufacture. However, the duty demand on the yarn manufactured in the unit and at the spindle stage, i.e. yarn on bobbins which was in fully finished condition and whose quantity has been accounted for in the RG-1 register, by adding to its value, the value of subsequent processes - winding/cheese winding/singeing and doubling/multifolding would not be sustainable, as when the single ply yarn is in fully finished condition at the spindle stage and is issued for weaving, it has to be treated as having been cleared a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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/multifolding, dyeing, sizing, beaming, etc. and since these processes app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also included spun man-made yarn purchased from the market and subjected to the above processes of winding, warping, etc., or doubling/multifolding and subsequently used in the factory for weaving of fabrics. In this order, the Commissioner besides confirming the above duty demand, also imposed penalty of ₹ 10,00,000/- on the appellant under Rule 173Q of Central Excise Rules, 1944. Against 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te which provides that in relation to the products of Headings 52.04, 52.05 and 52.06, the process of dyeing, printing, bleaching, mercerizing, twisting, texturising, doubling/multifolding, cabling or any other process or anyone or more of these processes or conversion of one form of the said product into another form of the said product shall amount to manufacture, that in view of this, 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 v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he submissions from both the sides and perused the records. 6. The duty demand in this case is for the period from 1995-1996 to 2000-2001 in appeal Nos. E/300-305/2005-EX (DB) and the duty demand has been demanded on - (a) the spun yarn of Chapters 52 and 55 of the Central Excise Tariff on the spindles which had been subjected to the processes 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 ₹ 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the process of winding before being captively used for weaving of fabrics. The duty demand is on the weight of the yarn at spindle stage and the duty has been demanded on the cost of winding on the ground that subjecting the yarn to the process of winding i.e. transferring the same from the bobbins to the cones amounts to manufacture. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 96-C.E., 4/97-C.E., 5/98-C.E., 5/99-C.E., 6/2000-C.E. and 3/2001-C.E. subject to the condition that the processes have been carried out on the duty paid yarn which is meant for weaving of fabrics within the factory and in these cases it is not in dispute that the single ply yarn was duty paid and the same had been used within the factory for weaving. The judgments of Apex Court in cases of Sidhartha Tubes Ltd. v. CCE (supra) and Union of India v. J.G. Glass Industries Ltd. (supra) relied upon by the Commissioner would be applicable only if the assessee had cleared the doubled/multifolded yarn for sale, which is not the case here. Since doubled/multifolded yarn is cleared for captive consumption within the factory for manufacture of fabrics the cost of winding, sungeing doubling/multifolding gets included in the cost of fabrics which is cleared on payment of duty. Duty on cost of these processes cannot be charged at single yarn stage by including the cost of these processes in the value of yarn at the spindle stage. We, therefore, hold that the duty demand confirmed by the Commissioner by the impugned order is not sustainable and for this reason, there is also no merit in the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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