2. The short point falling for determination in this case is whether Central Excise duty was leviable at the material time on blended yarn having an admixture of wool and staple fibre of non-cellulosic origin or staple fibre of collulosic origin, the wool content being less than 40%.
3. The appellants are manufacturers of blended yarn spun with admixture of wool and staple fibre of cellulosic origin or non-cellulosic origin.
The Assistant Collector of Central Excise, Ludhiana held that such yarn manufactured by the appellants fell for classification under Item No.18 of the Central Excise Tariff Schedule (CET for short) relating to "Rayon and synthetic fibres and yarn" at Rs. 14/- per Kg. (in the case of admixture of wool and staple fibre of non-cellulosic origin) and Rs. 6/- (in the case of admixture of wool and staple fibre of cellulosic origin) and not at Rs. 0.80 Paise per Kg. as woollen yarn (others) under Item 18-B of the CET relating to woollen yarn. On this basis, he demanded differential duty on certain quantities of blended yarn and also imposed a penalty of Rs. 250/- on the appellants for contravention of certain provisions of the CE Rules, 1966. The appeal preferred by the appellants was dismissed by the Appellate Collector of Central Excise, New Delhi who upheld the order of the Assistant Collector.
4. In the Memorandum of Appeal before us it has been urged, among other things, that central excise duty came to be leviable on blended yarn for the first time on 16/17th March, 1972 when the Legislature introduced Item No. 18-E in the CE Tariff Schedule to cover blended yarn and that the levy of excise duty on blended yarn prior to 17-3-72 under Tariff Item No. 18 was without authority of law. In support of this contention reliance has been placed by the appellants on the judgement of the Gujarat High Court in the case of the Ahmedabad Manufacturing & Calico Printing Co. Ltd., Ahmedabad v. Union of India and Ors. (CENCUS Reporter, March 1976, page 25-D). In the said case their Lordships had held that levy of excise duty on blended yarn prior to 16/17-3-72 under Item No. 18 (Rayon and synthetic fibres and yarn) or Item No. 18-A for cotton yarn was ultra vires, Blended yarn became excisable for the first time on 17-3-72 when the Legislature introduced Item No. 18-E in the CE Tariff Schedule to cover blended yarn. The goods in dispute in that case were blended yarn consisting of 70% synthetic staple fibre and 30% cotton and another blend of 67% of synthetic fibre and 33% cotton. Their Lordships also rejected the contention of the Revenue that the predominant weight test laid down in the Brussels Nomenclature should be adopted and that on that basis the predominant fibre would determine the classification of the blended yarn. In the present case before us the blended yarn comprises of wool and staple fibre of non-cellulosic origin on wool and staple fibre of cellulosic origin. However, the ratio of the judgement of the Gujarat High Court squarely applies to the instant case. We, therefore, hold that during the material time the impugned goods were not liable to excise duty. In the result, we allow the appeal and direct that consequential relief be granted to the appellants by the Assistant Collector of Central Excise, Ludhiana within 60 days from the date of communication of this order.