RUBY MILLS LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioners manufacture two kinds of spun years; one with 48% terene and 52% viscose and the other with 85% viscose and 15% polyester. The first one becomes chargeable under Tariff Item No. 18-III(ii) and the latter one becomes chargeable under Tariff Item No. 18-III(i). They pay duty on these two kinds of spun yarn. What they do is that they double these two yarns by a process. The doubling of the said yarn is carried out merely as a preparatory process to weaving the same into fibres in the Weaving Department of the First petitioners' Mills and is done with a view to providing an earior feed of yarn into the body of the fabric on the looms of the Weaving Department. The advantage of using doubled yarn in the body of the cloth on the looms is that the use of additional shuttles on the looms can be dispensed with. The doubling of yarn does not change the nature of character of the said two types of blended yarn produced by the First petitioners nor does it result in a new or different article from the said two types of yarn. The said doubling process does not cause any transformation of the said two types of yarn into anything else, nor does it result in any new product having a distinctive name, character or use. The two components of the doubled yarn are not only easily identifiable but also separable, thereby making it clear that the said doubled yarn really consists of two fully duty paid and fully manufactured yarns.

(2.) In respect of this the excise department issued a show cause notice dated March 20, 1981 wherein they alleged that the first petitioners were manufacturing a new product by doubling and which they have not classified and, therefore, they become liable for not classifying and for action as against them. The relevant portion of the said show cause notice is as follows :

(3.) Thereafter the department issued three more show cause notices viz. dated April 27/30, 1981, June 3, 1981 and June 20, 1981 and also a further amendment to these notices by further letters dated June 16, 1981 and June 18, 1981 and persisted in their demand that the doubled yarn becomes a new product and, therefore, is liable to be assessed under Tariff Item No. 18-III(ii) of the first schedule. It appears that in the meanwhile in a matter of Morarjee Gokuldas Spg. and Wvg. Co. Ltd. a similar question arose and the Collector of Central Excise by his order dated May 27, 1980 had expressly held against the assessees and observed that the doubled yarn becomes a new product and, therefore, becomes liable for separate excise duty. It appears that that order was set aside by the appellate authority, however, the matter was remanded back for de novo consideration. In appears that the Director of Inspection and Audit, Customs and Customs Excise, New Delhi, by his order dated May 26, 1981 upheld the contention of the department and came to the same conclusion. It is against this order that the assessee came to the High Court and filed a writ petition which is now decided by a judgment reported in 1982 E.L.T. 145 (Piramal Spg. and Wvg. Mills Ltd. v. Union of India and others). The learned Judge after considering the earlier decision of the Division Bench and also after considering all materials expressly held that by doubling the yarn, no new product comes into existence and, therefore, the department was not right in treating the doubled yarn in that manner.