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 single ply yarn is doubled or multifolded there is some wastage. If duty is paid on the production of single ply yarn the respondent would not get the benefit of exclusion of the waste which arises when that single ply yarn is used in the process of doubling/multifolding. That is why the respondent chose to pay duty after the process of doubling or multifolding had been completed. The Assistant Collector, Central Excise vide his adjudication order dated 27th September, 1982 confirmed the demand raised in the show cause notice by coming to the conclusion that the yarn at its spindle stage, after it had been spun, was a fully manufactured product and duty was payable at that stage.

5. Being aggrieved by the order of the Assistant Collector the respondent filed an appeal to the Collector (Appeals) who, vide his order dated 27th March, 1985, set aside the impugned order by holding that the duty was chargeable at the doubling/multifolding stage.

6. The appellant then filed an appeal before the Customs, Excise and Gold (Control) Appellate Tribunal contending that the single ply yarn had to be subjected to duty and by paying duty on the weight of the doubled yarn the respondent had avoided payment of the duty on the waste which was generated in the doubling of the yarn. The Tribunal, however, dismissed the appeal of the appellant.

7. In the present appeal it is contended on behalf of the appellant that the duty was payable when the single ply yarn was manufactured. It is not in dispute that at the stage of the manufacture of the single ply yarn, there comes into existence an excisable item. The respondent manufactures single ply yarn and it is only thereafter, if required by its customers, that the said yarn is doubled or multifolded, as the need arises. Mere doubling or multifolding of the single yarn which is manufactured does not bring into existence a new product. The single yarn which is manufactured is an excisable item and would be subject to duty upon its manufacture.

8. It is immaterial, in view of Rule 9(1) of the Central Excise Rules and Section 49 of the Act whether the yarn so manufactured is captively consumed or is subjected to any other or further process. Reference may be made to J.K. Spinning and Weaving Mills Ltd. and Anr. v. Union of India & Ors.1 where Rules 9 and 49 of the Central Excise Rules, 1944. after they were amended with retrospective effect by Section 51 of the Finance Act, 1982 came up for interpretation. It was held that "in view of the deeming provisions under Explanation to Rules 9 and 49, although the goods which are produced or manufactured at an intermediate stage and, thereafter, consumed or utilised in the integrated process for the manufacture of another commodity is not actually removed, shall be construed and regarded a