JUDGMENT

Kirpal, J.-The respondent company is engaged in the manufacture of yarn falling under tariff item No. 18, 18B and 18E of the Central Excise Tariff. It manufactures single ply yarn and it also, in the course of its manufacturing process, does doubling and multifolding of the yarn.

2. The respondent was paying excise duty, in case of doubled or multifolded yarn, on the weight of doubled or multifolded yarn and no excise duty was being paid on the single yarn which was being used for doubling or multifolding. A show cause notice dated 4th September, 1982 was issued by the Superintendent of Central Excise asking the respondent  to pay a sum of Rs. 35,190.96 as central excise duty which had been short paid during the year 1978-79 on the ground that it had utilised 4,56,456.10 Kgs. of single ply yarn for doubling process without payment of duty.

3. The respondent filed its reply dated 10th September, 1982, inter alia, contending that there had neither been any removal nor any utilisation of the yarn resulting in the production of a new commodity and, therefore, duty had been paid correctly at the time of removal after doubling/multifolding of the yarn.

4. It appears that when the s