D.P. LON versus COLLECTOR OF CENTRAL EXCISE AND CUSTOMS

Citation: [2003] 2 S.C.R. 1125 · Decided: 13-03-2003 · Supreme Court of India · Bench: S.N. VARIAVA · Disposal: Dismissed

Judgment (excerpt)

D.P. LON 
A 
V. 
COLLECTOR OF CENTRAL EXCISE AND CUSTOMS 
MARCH 13, 2003 
[S.N. VARIA VA AND DR. AR. LAKSHMANAN, JJ.] 
B 
Central Excise Tariff Act, 1985: 
Heading 56.06: 
c 
Classification-Fancy yarn/ Taspa yarn-levy of excise duty-Held: 
The process used by the appellant in manufacturing of yarn is bound to 
produce a special effect yarn-The yarn could appropriately classifiable as 
fancy yarn under Heading 56.06-Hence appellant liable to pay excise duty--
Central Excise Rules, 1944-Rule 17 4-Central Excises and Salt Act, 1944- D 
Section 6. 
Words & Phrases: 
'Fancy yarn'-Meaning of in thrz context a/Central F;xcise Tariff Act, 
1985. 
E 
Appellant-firm had been manufacturing yarn by the process of 
doubling/multifolding of yarn. The yarn so produced was claimed to be 
exempt from levy of excise duty. The Collector (Revenue) after issuing a 
show cause notice and not satisfied with the reply, confirmed demand of 
certain amount of central excise duty for certain period holding that the p 
yarn manufactured by the appellant was classifiable as fancy yarn under 
tariff sub-heading 56.06 and also imposed penalty under Rule 173 -Q of 
the Central Excise Ruies. The Tribunal re.iected the appeal and 
rectification of mistake application thereafter. Hence the present appeals. 
It was contended for the appellant that since the yarn produced by G 
the appella'nt was exempt from payment of excise duty and in view of 
conflicting decisions by the Tribunal on the subject, it was incumbent on 
the Tribunal to follow the latest judgment of"Pratik Crimpers v. Collector 
a/Central Excise, Mumbai, 1998 (101) ELT 437", and to set aside the order 
1125 
H 
1126 
SUPREME COURT REPORTS 
[2003] 2 S.C.R. 
A of the Collector levying excise duty on yarn manufactured by it, and that 
merely because the process resulted in the production of special effect yarn, 
the yarn.could not be classifiable under Heading 56.06. 
On behalf of the respondent it was submitted that since core yarn 
was used for base yarn, the yarn so produced was a special yarn falling 
B under Heading No. 56.06; and that the Tribunal had taken into 
consideration the manufacturing process as well as contents of the product 
and rightly came to the conclusion that the product in question was 
classifiable under Heading No. 56.06. 
c 
D 
Dismissing the appeals, the Court 
HELD: I.I. The Commissioner and the Tribunal have rightly 
decided that the sample appears to satisfy the requirements of definition 
of'Fancy Yarn' as given in the standar-' :~chnical literature and appears 
to be C?Vered under Heading No. 56.06 as 'special yarn'. [1131-FI 
1.2. Investigation revealed that the appellant had not obtained 
Central Excise licence for such manufacture and that they were removing 
such yarns without payment of central excise duty in the manner 
otherwise than as provided in the Central Excise Rules. Thus it is seen 
that the appellant-unit had contravened the provisions of Rule 174 of the 
E Central Excise Rules read with Section 6 of the Central Excises and Salt 
Act, 1944 Rule 173F read with Rule 9(1) etc. of the Central Excise Rules, 
1944 inasmuch as they engaged themselves in the manufacture of excisable 
goods, namely, Fancy yarnffaspa' yarn classifiable and chargeable to duty 
of excise under erstwhile Tariff Item 68 prior to 1.3.1986 and under 
Chapter/Heading 56.06 thereafter of the Central Excise Tariff Act, 1985 
F without their having applied for and obtained a licence and failed to 
determine their liability to duty in respect of these goods manufactured 
and removed by them without payment of duty leviable thereon. They 
have also failed to file classification lists and price lists as required and 
failed to prepare and issue gate passes in the prescribed form for the 
G removal of the aforesaid goods and further failed to maintain statutory 
accounts of the production and removal of the said goods manufactured 
by them in their factory and suppressed to supply the material facts with 
a deliberate and wilful intent to evade payment of Central Excise Duty. 
[1133-G, H; 1134-A, B, Cl 
H 
1.3. The yarn manufactured by the appellant is special yarn falling 
D.P. LON v. C.C.E. AND CUSTOMS [AR. LAKSHMANAN, J.] 
1127 
under Heading No. 56.06 and hence the exemption notifications mentioned A 
by them are not applicable in this case. They also failed to pay excise 
duty though they were required to pay duty and hence the action initiated 
by the preventive wing is corre

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