1. The proceedings in this case emanated from a notice to show cause bearing date 29-7-1976, having been issued by Superintendent, Central Excise, Chandernagore I Range (Annexure 'B') whereby the appellant company was called upon to show cause as to why central excise duty was not payable at all the three stages of manufacture of yarn, produced at their factory, namely, (i) cotton yarn (ii) staple yarn and (iii) the process of twisting or doubling these two yarns into a multiple fold yarn.
2. The facts, as revealed by the show cause notice, indicate that the appellant viz. a Company under name and style M/s. The General Industrial Society Limited (hereinafter referred to as the Appellant), manufactured separately cotton yarn of tariff item 18A, and staple yarn falling under Tariff entry 18, and used these two yarns as constituents, to produce a multiple-fold yarn, by the processing of doubling and twisting. During the period from October, 1975 to June, 1976, the appellant cleared this final product, by paying duty at the 3rd stage by treating it to be: "yarn, all sorts, not elsewhere specified", as contemplated by entry 18E of the Central Excise Tariff, as then prevailing. They availed of benefit of exemption of notification No. 30/75-C.E,, dated 1-3-1975, which pertained to tariff item 18E.3. The Department tentatively took the view that the central excise duty was payable at all the three stages, namely, on the two constituent yarns separately, and finally on the multiple fold yarn.
Accordingly show cause-cum-demand notice was issued, requiring the appellant to show cause as to why the amount of duty on these constituents, namely, cotton yarn and staple yarn on the basis of the production and clearances, be not recovered in accordance with the rates prescribed for these items. The total amount of duty was quantified, for the aforesaid period, to be Rs. 1,38,573.94. They were also informed that their act was tantamount to removal of the goods without payment of central excise duty, in clear violation of the provisions of Rule 9(1) 'read with Rule 173-F of the Central Excise Rules, 1944 punishable under Rule 9(2) read with Rule 173Q.4. In the reply, which the appellant filed (annexure 'C') against this notice, it was contended that they had not produced any multiple fold yarn, as alleged, and that the process consisted only of doubling of single thread yarns, which process according to them, did not and could not amount to manufacture. Since in their view the doubling of the already manufactured yarns would not again attract any of duty, they were entitled to refund of the amount of duty already paid, on such yarn which amount was asserted to be Rs. 2,27,500.80, in respect of 11849 kgs., and not Rs. 2,22,636.20 as conveyed by the Department. This payment was contended to have been made under the mistake of law and/or fact. Consequently they staked their claim for refund of this amount.
They controverted Department's stand that the provisions of Rule 9(1) read with Rule 173F of the rules, and that the provisions of Rule 9(2) read with Rule 173Q, were attracted, exposing them to liability or punishment with reference to the aforesaid rules, were emphatically controverted. They pleaded, at the end, that in case duty was sought to be levied on the constituent yarns, namely, the cotton yarn as well as the staple yarn, that could be levied only after they had been granted refund of the amount of duty, they had paid on the doubled yarn. They reiterated their stand that no duty was leviable on this doubled yarn and consequently the duty which was according to them not due ought to be refunded before any further claim of payment of central excise duty on other two yarns was pressed. They thus repudiated Department's claim to the recovery of duty on these yarns; in any case, without first refunding back the duty already paid at third stage. It was also contended that for the manufacture of yarn, the process of spinning was inevitable and that since the process of doubling did not involve any spinning, this final product could not be considered to be involving any manufacture, so as to be exigible to excise duty.
5. However, the Assistant Collector of Central Excise, Chandernagore by his order dated 15-7-1977 confirmed the show cause-cum-demand notice by holding that the process of manufacture of the multiple fold yarn, involved three different stages attracting three different tariff items. He observed that prior to this process of doubling or multiple folding; the cotton yarn was in cone, from T.I. 18A, and the staple yarn in similar form, covered by T.I. 18 and both were in deliverable stage, and quite fit to be recorded in RG 1 records, and to that extent they attracted levy of central excise duty when removed in cones to the doubling machine for doubling, which resulted in the manufacture of a separate yarn covered by T.I. 18E. This ultimate product was a yarn "not elsewhere specified," as contemplated under T.I. 18E because it was a combination ' of different percentages as revealed by the chemical analysis report. He further took note of the fact that the Company had themselves declared the final product, as multiple fold yarn, falling under T.I. 18E, and had paid excise duty accordingly, and that the contention now being set forth that it was not any excisable item at all, was contradictory to their own earlier declaration. He further took note of the fact that it was not a case of doubling of similar yarns, but combinations of two different yarns, namily, one cotton and one staple, and there was certainly a new product which came into being. He thus recorded the finding that this company had produced and cleared 11,849 kgs. of multiple fold yearn under T.I. 18E during the period October, 1975 to June, 1976 by treating the product as a single yarn, hut that the licencee had failed to pay central excise duty on the cotton yarn and staple yarn at the first two stages, for which they were liable to pay duty. According to him it was only in the event of doubling of one duty paid yarn with another duty paid yam 'NES', that there may not be any further levy of duty on doubling of these two duty paid yarns, but in the present case no duty had been paid either on the cotton or on the staple yarn, which were delivered for doubling and doubled, and a new category of yarn, "not elsewhere specified" was produced, and consequently both the cotton yarn as well as the staple yarn, would be liable to duty separately under T.I. 18A and 18 respectively. He further observed that the fact the duty had been paid at the third stage was not relevant so far as to duly liability in respect of the constituent yarns was concerned. He accordingly confirmed the demand, made by means of notice, dated 29-7-1976, and worked up the amount to be Rs. 1,38,573.94.
6. The Company went in appeal against this order, to the Appellate Collector of Central Excise, Calcutta, but the same was rejected by order dated 26-12-1979. The Appellate Collector in his detailed order considered all the arguments set forth on behalf of the appellant before him, and rejected party's contention that since doubling did not involved any spinning, there was no question of production of any type of yarn, and that Item 18E was not meant to apply to this type of doubling of cotton yarn and synthetic yarn. He noted the argument as put forward on behalf of the appellant, to the effect that though the final goods also answered the description of yarn, not elsewhere specified as per item 18E, but this fact by itself did not make them dutiable under the said tariff item on the plea that what had been done did not involve any of manufacture, and that mere doubling, and twisting of the two yarns would not make the third yarn dutiable. This contention of the party was, however, rejected by taking note of a ruling of Gujarat High Court, given in case of Alembic Glass Industries Ltd., Baroda v. U.O.I. and Ors., to the effect that "excise duty could be levied on excisable goods, and that it could be levied on different stages at which the goods underwent transformation, and new goods or commodities are brought into existence, and that change of identity or emergence of new article or commodities was the test for levying excise duty afresh." He consequently held that the observations of the Gujarat High Court quoted by him made it clear that the moment a new marketable commodity, resulting in change of identity, and answering to the description of a tariff item comes into existence, then duty under that tariff heading had to be paid.
7. The Appellate Collector after formulating the issues involved as being; firstly, whether there had been change in the identity of goods, that is, had their been any manufacture ?, secondly, had there been a new marketable commodity, and thirdly as to whether this new commodity answered the description of item 18E, came to the finding that the appellants started with one type of yarn, namely, cotton yarn and another type of synthetic yarn, and twisted them to a form a third type of yarn, bringing about a positive change of identity in the constituent yarns because the resultant yarn was known as neither a cotton yarn nor as staple yarn, but a mixed or multiple yarn, and was not known by either of its previous names, and that it had attained a different brand name, and was marketed as different commodity. This process according to him satisfied the test laid down by the Supreme Court in the South Bihar Sugar Mills. He also disposed of the arguments that process of manufacture of yarn, must involve spinning, and held that this was not the only criterion, and that every yarn in the ordinary commercial sense had two characteristics, namely, (1) it had to be spun and (2) it should be fit for weaving. He held the final product in this case to be spun yarn on the view that two spun yarns had combined to make this final product, and it was not necessary that spun yarn had to be spun again, in order to make it a yarn, as according to him spinning could take place only once. He thus recorded the positive finding, that the goods in this case at the final stage were yarn within the meaning of T.I. 18E because manufacture of this yarn, had taken place from spun yarns, and was fit for-weaving, after a new product had been brought into being by twisting the two constituent yarns. He concluded by saying that so long as there had been a change in the identity from the original constituent yarns, into a new type of yarn, and so long as the final product was a variety of yarn, which was fit for weaving; the finally produced goods would be leviable under item 18E. He thus held it to be a case where multiple point taxes under items 18A, 18 and 18E were all justified.
8. The order of the Appellate Collector was challenged, by means of revision petition, filed before the Government of India and it is this petition which has been received by the Tribunal by transfer under the provisions of Section 35P of the Central Excises and Salt Act, 1944 to be treated and disposed of as an appeal. It has been accordingly taken up as such.
9. Shri Gopal Prasad, Consultant appeared for the appellant, whereas the Department was represented by Shri K.D. Tayal, SDR. The learned Consultant for the appellant explained the process as being first spinning of cotton yarn, and second staple yarn, as covered by items 18A and 18 of the Central Excise Tariff respectively and that thereafter what they produced was known as multiple yarn. He conceded that the appellant on its own had classified this final product to be falling under T.I. 18E, and had filed declaration accordingly with reference to this tariff item, read with Notification No. 30/75. He very fairly conceded that he did not dispute the fact that this process of doubling and twisting of two different types of yarns, involved the process of manufacture, and to that extent he would not press the contention that no manufacturing process was involved. He also conceded that excise duty was payable on the constituent yarns also, namely, cotton yarn and staple yarn, and that the same had not in fact been paid. The contention however which he put forward very vehemently was that nevertheless this final product could not be treated, as falling under T.I. 18E, even as it stood prior to its amendment, with effect from 18-6-1977; His main emphasis was on the fact that the term yarn has not been defined anywhere in the tariff but the established meaning of this term was that "yarn" was, what was spun from fibre. He referred, in support of his contention, to glossary of terms, published by I.S.I. being IS-232/1967 in support of this contention, and also referred to the authority of Bombay High Court reported as Piramal Spinning and Weaving Mills Ltd. v. U.O.I. and Ors. (1982 ELT 145). He drew attention of the Bench to the tariff item 18E as it now stands, namely, after its amendment on 18-6-1977 to stress that it is now specifically restricted to "spun yarn", and argued that the same condition be taken to apply before its amendments, as the definition of very term yarn postulates spinning from fibre, and that the amendment had only made explicit what was previously implicit. He thus argued that since spinning was not involved, at the stage of production of multiple yarn, it could not be treated to be yarn falling under T.I.18E, but that it would have to be treated as a category of goods "not anywhere specified," in the tariff, and thus taken to the residuary item 68. In reply to a query from the Bench, he however elucidated that this product was being described in the invoices, as "multiple yarn", and further clarified that this position was not in fact disputed.
10. He further elaborated his contention by referring to dictionary meaning of the term "yarn", as given in the Modern Textile Dictionary by George E. Linton at page 761, according to which the term yarn was a generic .term for assemblage of fibres or filaments twisted together to form a continuous strand, which can be used in weaving, knitting, braiding, plaiting or otherwise made into a textile material. A copy of the excerpt is placed in the blue paper book at page 3. He contended that the party had taken up this position, as soon as notice for payment of excise duty on the constituent yarns was received, by lodging a refund claim for the duty paid on the resultant yarn by means of letter dated 29-9-1976. He concluded his arguments by saying that though the constituent yarns were liable to duty, and so was the multiple yarn, but the final product could not be subjected to excise duty under T.I. 18E, but only under item 68.
11. Shri K.D. Tayal, SDR while replying took up the preliminary objection, to the effect that the issue as now raised by the learned consultant was not taken up at any stage, before, the lower authorities nor even in the appeal (revision petition), and that this was not at all germane to the controversy as originally raised and that absolutely new plea was being raised with reference to item 68, which according to him could not be entertained. He further argued on merits, that tariff item 18E as it read prior to 1977 did not stipulate that it would be only confined to "spun yarn" and that it could cover any blended or mixed yarn,' not elsewhere specified". He also distinguished the authority of Gujarat High Court cited on behalf of the appellant, namely, that of Ahmedabad Manufacturing and Calico Company Ltd. v.U.O.I. (1976 Cen-cus P. 25 D) and argued that this only related to pre-1972 period and only traced the history of item 18, and had no bearing on the point at issue. He referred to party's own classification, as to this yarn being classified as multiple yarn under T.I. 18E, and duty having been accordingly paid. He laid great emphasis on the fact that when the legislative entry was clear, and there was no ambiguity as to the trade usage and parlance, one does not have to go to dictionary or technical meaning He referred to a Supreme Court authority in support of this contention reported as 1981 ELT P. 325 (Indo International Industries v. Commissioners of Sales Tax, U.P.), laying down that in case of a term or expression being defined in the enactment, the same be understood in the light of the definition given in the Act, in the absence of which, the meaning of the definition given in the Act, in the absence of which, the meaning of the term as understood in common or commercial parlance must be adopted. He also wanted to refer to certain other authorities, as to whether this process of doubling amounted to "manufacture or not", but it was pointed out to him, that the learned consultant for the appellant had conceded that this process did amount to manufacture; and he need not dwell further on this question. He then went on to argue that tariff heading 18E, as It was worded at the relevant time, was more specific as compared to tariff item 68, inasmuch as whereas entry 18E applied to "yarn" : "not elsewhere specified", tariff item 68 related generally to all goods "not otherwise specified". He thus concluded that T.I. 18E ought to prevail over tariff heading 68; besides reiterating his contention that this argument could not be allowed to be raised at this stage. A resume of the foregoing reveals that the controversy now boils down to a very limited and narrow point, namely, as to whether the final product, cleared and traded as "multiple yarn", would attract Tariff Entry 18E as it then existed, or would go under Tariff Item 68.
12. We have given our very careful thought to this matter, and we are of the clear view that the wording of the Tariff Entry, as it prevailed at the relevant time, has to have foremost consideration than any dictionary meaning or definitions given in the abstract. To facilitate appreciation, we would like to reproduce Tariff Entry 18E, as it then existed :- "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." 13. A bare reading of the aforesaid entry makes it manifest that this item covered all varieties of yarn, which did not fall under any of the specific entries, preceding this entry, namely, 18, 18A, 18B, 18C and 18D. We also find from a reading of this Tariff Entry 18E, as it then stood that there was no built-in limitation so as to restrict the yarn contemplated by this entry, only to "spun" yarn. We find considerable force in the contention of the learned SDR that the expression "all sorts" would take in its sweep every variety of yarn. There is no dispute that the final product is being traded as yarn, and is known in the market as a particular variety of yarn, having a distinct usage which the appellants themselves describe to be "multiple" or "fancy yarn". It apparently does not fall under any of the specific tariff headings, enumerated above. The fact that this product was a yarn, besides not being disputed at this stage, is otherwise borne out from the fact 'that it is so described in the invoices prepared at the time of clearances, and from the conduct of the party in voluntarily classifying it as falling under Tariff Entry 18E at the relevant time.
It was only when, the demand was made for payment of duty on constituent yarns also, which liability is also being conceded now, that the appellants turned round and repudiated liability to pay excise duty on this final product, having already paid the same on their own declaration. We are of the firm view that the appellants' contention to the effect that any yarn to fall under Tariff Entry 18E must first satisfy the condition of being "spun" deserves to be rejected as it has no merit to consideration for the simple reason, that the Tariff Entry at that time did not stipulate any 'such condition. The change which was brought with effect from 18-6-1977 by introducing this requirement in the Tariff Heading 18E cannot operate retrospectively, so as to change the very definition of the Tariff Item. Consequently reference to the case of Piramal Weaving Company (1982 ELT 145) or "glossary of terms" published by the Indian Standards Institution, as referred to by the learned Consultant, or to the dictionary meaning as given in the Excerpts filed by the party and referred to above, have no relevance, when the wording of the Tariff Entry is unambiguous.
14. We also find justification in the distinction drawn out by the learned SDR. Tariff Entry 18E vis-a-vis Item 68 inasmuch as the former refers to all type of "yarns" not elsewhere specified wheras Tariff Entry 68 refers to all "goods" not otherwise specified. To that extent, the former is more specific so far as yarn is concerned, as compared to the latter. We, therefore, do not think that the controversy now raised, namely, that the multiple yarn ought to be classified, under Tariff Entry 68 and that the proportionate refund be allowed to be adjusted accordingly, is entertainable. The finding of the lower authorities as to constituent yarns also being liable to excise duty as contemplated by Tariff Entry 18A and 18 respectively, is not even being disputed. We find the appeal accordingly liable to rejection. The same is rejected accordingly.