LAL WOOLEN AND SILK MILLS (P) LTD. AMRITSAR versus THE COLLECTOR OF CENTRAL EXCISE, CHANDIGARH

Citation: [1999] 2 S.C.R. 640 · Decided: 13-04-1999 · Supreme Court of India · Bench: AJAY PRAKASH MISRA, R.P. SETHI · Disposal: Dismissed

Judgment (excerpt)

A 
LAL WOOLEN AND SILK MILLS (P) LTD. AMRITSAR 
v. 
THE COLLECTOR OF CENTRAL EXCISE, CHANDIGARH 
APRIL, 13, 1999 
B 
[A.P. MISRA AND R.P. SETHI, JJ.] 
Central Excise Rules, 1944 : Rules 56-A(2), 56A-(2B). 
Excise-Entitlement for set off-Year 1976-77-Notification Nos. 235/ 
C 76 and 236176-Assessee-Payment of excise duty on dyed worsted woollen 
yarn after having paid the duty on worsted woollen grey yarn-Asseesee has 
not followed the procedure as contemplated under sub-section (2) by making 
an application for proforma credit-Rule 56-A(2) was amended on 21st 
February, 1981 by introducing sub-rule 2 B, under which power was entrusted 
to the Collector both, to condone the defect of any procedure of sub-rule 
D (2) and to confer benefit to such assessees-Assessee cannot claim benefit of 
this Amendment-Assessee held not entitled to set off the differential amount 
of duty while being taxed on "Dyed-yarn. " 
Excise-Manufacture-Conversion of grey yarn- into 4yed yarn-
E Amounts to manufacture. 
Empire Industries Ltd v. Union of India, [1985] 3 SCC 314 and Ujagar 
Prints v. Union of India, [1989] 3 SCC 48, referred to. 
CIVIL APPELLATE JURISDICTION: Giv:nAppeal No. 473of1986. 
F 
From the Judgment and Order dated 12.8.85 of the Customs, Excise and 
Gold (Control) Appellate Tribunal, New Delhi in A. No. E-46of1985 (D). 
P.S. Sudheer and K.J. John for the Appellant. 
T.L.V. Iyer, K.J. Francis, P. Parmeshwaran and V.K. Verma for the 
G Respondent. 
The following Order of the Court was delivered : 
The short question raised for the assessee is, whether he is liable to pay 
excise duty on dyed worsted woollen yam when he has already paid the duty 
H on the worsted woollen grey yam, if liable, whether he is entitled for set off 
640 
LAL WOOLEN AND SlLK MILLS (P) LTD. v. C.C.E. 
641 
the difference of excise duty, which he paid for the 'grey yarn' while being A 
taxed on the said 'dyed yarn'? The--tWo Notifi~ations imposing duty on the 
said two goods are Notifications 235/76 and 236/76. It is not in dispute for 
the first time separate rate of duties were imposed on 'grey yarn' and 'dyed 
yarn' in 1966. Thereafter, through the aforesaid Notifications different tariff 
values and separate rates of duty were notified for the said two goods. In B 
spite of this the assessee continued to pay the differential duty in view of 
the earlier practice without any objection from the Department. It is only on 
24th August, 1977 notice was issued by the Department refusing such set off. 
Department case is that woollen yarn is notified in the schedule to Rule 56 
A of the Central Excise Rules. Thus under this Rule grant of proforma credit 
is permitted and not any set off subject to the claim by the assessee under C 
sub-rule (2) of Rule 56A. As no such permission was obtained by the assessee 
from the Assistant Collector under Rule 56 A, thus the appellants were 
directed to show cause why Central Excise Duty of Rs. 4,08,789.96 should not 
be recovered under rule 10 of the Central Excise Rules. The Assistant Collector 
confirmed the said demand over-ruling the assessee's objections with reference 
to the past practices. In appeal the Collector of Customs and Central Excise D 
(Appeals) New Delhi confirmed the order passed by the Assistant Collector 
of Central Excise, Amritsar. The Customs, excise and Gold (Control) Appellate 
Tribunal partly dismissed the appeal of the assessee with majority of 2: 1 
relying upon the decision of this Court in Empire Industries Limited v. Union 
of India, [1985] 3 SCC. 314. Learned counsel for the assessee attempted to E 
distinguish this case that the said decision related to 'cotton fabrics' while 
our case is of 'woollen yarn'. An attempt was made by the learned counsel 
for the assessee that conversion of grey yarn into dyed yarn did not amount 
to any manufacture hence two separate duties are not leviable. We do not find 
any merit in this submission. Admittedly both 'dyed yarn' and 'grey yarn' are 
covered by two separate distinct head of tariff item with different duty. So this F 
itself recognises they to be two different goods with separate levy. In view 
of this it cannot be urged that there is no manufacture of 'dyed yarn' from 
the 'grey yam'. 
Next the only short point pressed for decision is, whether appellant is G 
entitled for set off under Rule 56A, when he has not followed the procedure 
as laid down under sub-rule (2) of the said Rule? It is true it is not in dispute 
that assessee ha

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