COLLECTOR OF CENTRAL EXCISE, AHMEDABAD ETC. ETC. versus ASHOKA MILLS LTD. ETC. ETC.

Citation: [1989] SUPP. 1 S.C.R. 86 · Decided: 08-09-1989 · Supreme Court of India · Bench: S. RANGANATHAN · Disposal: Dismissed

Judgment (excerpt)

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COLLECTOR OF CENTRAL EXCISE, AHMEDABAD 
ETC. ETC. 
v. 
ASHOKA MILLS LTD. ETC. ETC. 
SEPTEMBER 8, 1989 
[S. RANGANATHAN AND N.D. OJHA, JJ.l. 
Central Excises & Salt Act, 1944/Central Excise Rules, 1944-First 
Schedule Item 18E and 19/Rules 96 V & Wand_ Notification No. 110/61 
dated 20.4.61, No. 146/77 dated 18.6.77, No. 62/72 dated 17.3.72-'Yarn 
all sorts not otherwise specified' -Interpretation of-Duty-Levy of-
Special procedure-Availability of-Yarn produced after 173.72 
cleared for captive consumption before 24. 7. 72 but lying in various 
departments and not cleared as on 24. 7. 72. 
The department took the view that in respect of the yarn 
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manufactured between 17 .3. 72 and 23. 7. 72 the assessee is liable to pay 
the normal duty payable on yarn under Item 18E so long as the fabrk 
manufactured out of such yarn remained uncleared from the factory as 
on 24. 7 .1972. On the other hand the assessee's contention was that 
excise duty on yarn is attracted as soon as it is produced and cleared for 
captive consumption. 
The Customs, Excise & Gold Control Appellate Tribunal 
(CEGAT) accepted the contention of the assessee and held tliat the 
yarn cleared for captive consumption during the period from 17.3. 72 to 
23. 7. 72 in terms of the special procedure was entitled to the benefit of 
the rate fixed under Notification No. 62/72-CE dated 17.3. 72 and that no 
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further duty was payable on that quantity of the yarn and a consequen-
tial refund to tbe appellants was directed. Aggrieved by the order of the 
Tribunal the department preferred these appeals to this Court. While 
.dismissing the appeals and upholding the view taken by the Tribunal, 
this Court, 
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HELD: Rules 96 V & W of the Central Excise Rules, deal with two 
items: cotton yarn or yarn falling under item 18E of the First Schedule 
and woollen yarn. Normally, under tbe schedule to the Act, woollen 
yarn was being charged to excise duty on an ad valorem basis while 
cotton and other yarn was being assessed on weight basis. [92C) 
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Yarn 1s an exdsable commodity and. but for the special procedure 
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C.C.E. v. ASHOKA MILLS [RANGANATHAN, J.I 
87 
and notification, duty thereon is leviable at the point of production and 
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clearance for captive consumption. The dnty attached itself at the point 
of production and clearance of the yarn. The notification doe.s not alter 
this position. It does ncit shift the incidence of duty from yarn to the 
woven fabric. [94E-F] 
The proviso to Rule 96-W does not help the Revenue. It only 
contemplates cases where there is a change in the rates prescribed 
under the notification between the date of production of the yarn and 
the date of clearance of the fabric. [94H; 9SA] 
The words of the proviso can be extended to cover a case where 
the notification itself has ceased to apply by the date of clearance of the 
fabric. To apply the proviso to such a case would result in its applicabil-
ity to a totally different situation. It would involve a comparison of 
unlikes. [9SE] 
Crown Spinning & Manufacturing Co. Ltd. v. Collector, [1983] 
E.L. T. 2433, referred to. 
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 
2436-37 of 1987 etc. 
From the Judgment and Order dated 2.4.1983 c' the Customs, 
Excise and Gold Control Appellate Tribunal, New Delhi in Appeal 
No. ED (T)/SB/64/76-D and ED(SB)(T) A. No. 61/76-D in Order 
Nos. D-169 and 170 of 1983. 
V.C. Mahajan, A. Subba Rao and C.V. Sobba Rao for the 
Appellant. 
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Soli J. Sorabjee, P.H. Parekh, M.K. Pandit and J.P. Pathak for 
the Respondent. 
The Judgment of the Court was delivered by 
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RANGANATHAN, J. These are three appeals by the Collector G 
of Central Excise. Two of then relate to Ahmedabad and one to 
Bombay. The Ahmedabad appeals are in the case of Mis Ashoka Mills 
Ltd. and the Bombay appeal is in the case of Mis Mafatlal hne Sp'o-
ning and Manufacturing Co. Ltd. These appeals raise a very interest-
ing question. 
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SUPREME COURT REPORTS 
[1989] Supp. 1 S.C.R. 
The assessee respondents are companies manufacturing yarn and 
A cotton fabrics, the manufacture of yarn being a step in the process of. 
the manufacture of cotton fabrics. Cotton fabrics (which expression 
included all fabrics containing more than 40% by weight of cotton) 
.., 
were s11bject to excise duty on an ad valorem basis under item 19 of the 
tariff in the First Schedule to the Central Excises & Salt Act, 1944 
B (hereinafter referred to as 'the Act'). "Yarn, all sor

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