UNION OF INDIA AND ORS. versus GARWARE NYLONS LTD. ETC.

Citation: [1996] SUPP. 5 S.C.R. 629 · Decided: 09-09-1996 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Dismissed

Judgment (excerpt)

UNION OF INDIA AND ORS. 
v. 
GARWARE NYLONS LTD. ETC. 
SEPTEMBER 9, 1996 
(S.P. BHARUCHA AND K.S. PARIPOORNAN, JJ.) 
Central Excise and Salt Act 1944, First Schedule, Item 18 and 
68-Whether 'Nylon Twine' could be considered as 'Nylon Yam' under Item 
18-Held, evidence led showed nylon twine treated as nylon yam by the 
people conversant with the trade, hence classifiable under Item 18. 
The respondent assessee manufacture Nylon Yarn and Nylon Twine 
and were allowed to clear Nylon Twine under Item 18 of the first schedule 
to the Central Excises and Salt Act, 1944 ('Act') upto 1977. Since the 
assessee contended that the Nylon Twine manufactured by them was used 
A 
B 
c 
for the purpose of making fishing nets, they were permitted to avail a D 
partial exemption from payment of duty. With the introduction in 1977 of 
Item 68 to the schedule to the Act, the Revenue construed nylon twine as 
· being different from nylon yarn and classified it under Item 68. The 
assessee paid the duty so assessed under protest. 
The application by the assessee for refund of the excise duty was 
' rejected by the Assistant Collector and its appeal was also rejected by the 
Appellate Collector. After the Central Government dismissed its revision 
petition, the assessee approached the High Court of Mumbai which upheld 
its contention and directed the Revenue to refund to the assessee the excess 
amount collected from them as duty on the basis that nylon twine fell 
under Item 68 of the first schedule to the Act. 
Before this Court, the Revenue contended that nylon twine and nylon 
yarn were different commodities. The assessee contended that nylon twine 
E 
F 
was considered a kind of nylon yarn by traders and persons dealing with G 
the subject ml!tter. 
Dismissing the appeal, this court 
Held : 1. The evidence. led in this case conclusively showed that nylon 
twine manufactured by the assessees has been treated as a kind of nylon H 
629 
630 
SUPREME COURT REPORTS (1996] SUPP. 5 S.C.R. 
A yarn by the people conversant with the trade. It was commonly considered 
as nylon yarn. Hence, it was to be classified under Item 18 oft.he Act. [639·B] 
2. The burden of proof was on the taxing authorities to show that the 
particular case or item in question, is taxable in the manner claimed by 
them. Unfortunately, no such attempt was made. The Revenue failed to 
B establish the contrary.[ 638-F-H; 639-B] 
" 
· Indian Cable Company Ltd., Calcutta v. Collector of Central Excise, 
Calcutta and Others., [1994) 6 SCC 610; Collector of Central Excise, Chan-
digarh v. Steel Strips Ltd., Sangrur, [1995) 4 SCC 241 & Dunlop India Ltd. 
C v. Union of India, AIR (1977) SC 597, referred to. 
'Principles of Statutory Interpretation' (Sixth Edition • 1996) by Justice 
G.P. Singh, referred to • 
. I 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 715 of 
D 1981 Etc. 
•, 
· From the Judgment and Order dated 9.4.80 of the Bombay High 
Court in S.C.A. No. 2974 of 1978. 
E 
P.A. Chaudhary, A. Subba Rao, V.K. Verma, Ms .. Sushma Suri and 
P. Parmeshwaran for the Appellants. 
~· r , 
Dushyaitt Dave, R.N. Karanjawala, Ms. Ruby Ahuja, Sandeep Mittal, 
Ms. Manik Karanjawala, F.L. Benarwalla, J.P. Pathak, Ms. Rohini Dan-
dekar, A.C. l\Iahimkar and Ms. Amrita Mitra for JBD & Co. for the 
F Respondents.J 
I ' 
G 
The Judgment of the Court was delivered by 
PARIPOORNAN, J. Special leave granted in S.L.P. (C) No. 11008 of 
1988. 
2. The above three appeals involve a common question of law, 
namely, whether "Nylon Twine" can be considered as "Nylon Yarn" so as 
to be covered by Item 18 of the First Schedule to the Central Excises and 
Salt Act, :;_944 {hereinafter referred to as "the Act") as it stood prior to the 
H Amendment of 1977 . 
. , 
' 
Tariff 
Item 
18. 
r •· 
. ! 
U.O.l.1'. GAR WARE NYLONELTD. [PARIPOORNAN,J.] 
631 
"18 RAYON AND SYNTHETIC FIBRES AND YARN 
Description of goods 
Rate of duty Basic 
RA YON AND SYNTHETIC FIBRES 
AND YARN INCLUDING TEXTURED 
YARN, IN OR IN RELATION TO THE 
MANUFACTURE OF WHICH ANY 
PROCESS IS ORDINARILY CARRIED 
ON WITH THE AID OF POWER : 
(i) Fibres and Yarn other than Textured Rs. 85.00 per kg. 
Yarn. 
The duty for the 
(ii) Textured Yarn produced out of Base time being 
Yarn 
leviable on the 
base yarn, if not 
already paid plus 
Rs. 20 per kg. 
(iii) Other Textured Yam 
Rs. 105.00 per kg. 
Explanation-I "Fibres and Yarn, other than Textured yarn", shall 
be deemed to include -
(i) 
man-made fibres; 
(ii) 
man-made metallic yarn; 
(i

Excerpt shown. Read the full judgment & AI analysis in Lexace.