SHELAT, C. J. :- Prior to March 1, 1961, only cotton fabrics were under Entry 19 in the First Schedule to the Central Excises and Salt Act, 1944, chargeable to excise duties therein set out. By Finance Bill of 1961, item 18A was inserted in that Schedule and accordingly cotton yarn amongst other articles became chargeable to excise duty at the rate of 30 naye Paise per kilogram in respect of yarn of 35 or more counts and 15 naye Paise per kilogram in respect of yarn of less than 35 counts. By a trade notice bearing No. 16 of 1961 dated March 6, 1961, the Central Excise authorities notified that the aforesaid duty at the prescribed rates would be leviable on cotton yam, twist, thread, etc., with effect from the midnight of February 28 and March 1, 1961. The trade notice also made it clear that the duty on yarn would be in addition to the duty on cotton fabrics and that yarn used in the weaving section of a factory by itself shall be assessed to duty before its issue to the weaving section. It appears that owing to certain difficulties felt by the authorities as also the trade in the matter of the proper assessment and levy of the said duty on yarn, Section EVI containing Rules 96 V, 96 W and 96 X was inserted in the Central Excise Rules, 1944, called the Central Excise (Sixth Amendment) Rules, 1961, under which a new procedure called the procedure as to compounded levy was evolved. The effect of the new procedure was that a manufacturer who produced cotton yarn and used the same or part thereof in the manufacture of cotton fabrics in his own factory would have the option to pay compounded duty as might be prescribed by the Central Government from time to time, not at the time when the, yarn was issued to the weaving section but at the time when cotton fabrics made from such yarn were cleared, on a certain basis, namely, on per square metre of cotton fabric manufactured from such yarn. These rules were published by a notification bearing No. 110 of 1961 dated April 20, 1961.

2. Under clause (1) of Rule 96 V such a manufacturer has to make an application for permission to apply the new procedure and on such application being granted, he would have the right to pay the compounded levy during the period so permitted instead of the standard rate of duty prescribed by the new entry 18A. Clause (2) of Rule 96 V, however provided that such an application should be made so as to cover a period of at least six consecutive calendar months though the clause gave discretion to the Collector to give such permission even for a period shorter than six months. Under clause (3) of Rule 96 V, if the manufacturer who had been given such permission felt that he did not wish to avail himself of the procedure of compounded levy, he could revert to the standard duty payable under entry 18A but such a manufacturer would have to give one week's notice in writing to the proper officer of his intention not to avail of the new procedure and if he were to tail to give such a notice, he would be precluded from availing himself again of the new procedure for a period of six months from the date of such failure. By a further notification dated April 20, 1961, bearing No. 111 of 1961, the Central Government in pursuance of rule 96 W directed that the rate of duty in respect of cotton yarn of any count shall be 1.2 naye Paise per square metre or cotton fabrics produced from such yarn. The result of rule 96 V and the said notification was that a manufacturer working a composite factory would be entitled to pay duty at the rate of 1.2 naye Paise per square metre or cotton fabrics produced by him at the time of the clearance of those fabrics rather than pay the standard duty on yam issued by him for the manufacturing processes as prescribed by entry 18A of the First Schedule. It appears, however, that certain difficulties in applying Rule 96 V and in making assessment of compounded duty arose and to obviate those difficulties the Central Excise Collectorate