2.    The matter the been examined. During the period prior to 1.3.94, sewing thread falling within the Chapters 52, 54 or 55, if manufactured out of duty paid singly yarn, were exempted from excise duty by virtue of notification No. 318/86-CE dated 22.5.86 and subsequently notification No. 53/87-CE dated 1.3.87. It may, however, be mentioned that the process of making sewing thread out of single yarn was process of manufacture. It is only then that there was need for issuing a exemption notification in respect of doubled/ multi-fold yarn manufactured from duty paid yarn. It may be mentioned that even though the words "sewing thread" were included in the description of each of the heading No. 52.03, 52.04, 54.02, 54.04, 55.05 and 55.06, there was no Chapter Note indicating that the process of doubling or multifolding of single yarn amounts to "manufacture". This shows that the duty liability on doubled or multifold yarn and therefore on sewing thread arose not because the words "sewing thread" were included in some of headings but because of the fact that the sewing thread is a product different in form, characteristics and uses from the single yarn out of which it is made. In other words, though it may be basically a double or multifold yarn the process of conversion of single yarn into double or multifold yarn results into goods of different character and use and thus amounts to "manufacture" under Section 2(f) of the Central Excise and Salt Act, 1944. The argument that there was a definition of sewing thread for all the headings except heading No. 55.04 in the tariff is not really relevant so far as the dutiability of sewing thread is concerned. The dutiability does not arise by virtue of the fact the definition of sewing thread was provided for in certain headings but by virtue of the fact the the process of making sewing thread out of single thread out of single yarn in basically a process of manufacture under Section 2(f). In view of this, excise duty on sewing thread falling under heading No. 55.04 is required to levied during the period 1.3.94 to 15.3.95.

3.    As part of the 1995 budget changes, separate headings in each of the Chapter 52, 54 and 55 were introduced for sewing thread. Accordingly, every sub-heading relating to yarn would not include sewing thread within its scope. Not only that when separate headings have been prescribed for sewing thread sewing thread unless specifically mentioned in the notification itself. Notification No. 35/95-CE exempts only yarn and does not exempt sewing threads from excise duty in this context, attention is also invited to para 10 of letter F.No. B 40/4/95 dated 19th May, 1995 wherein also it was mentioned that the processes of beaming, warping, wrapping, winding or reeling, which have been exempted vide above notification, are basically necessary for waving of fabrics only. The exemption vide S.No. 5 of notification No. 35/95-CE, dated 16.3.95 as amended by notification No. 84/95-CE dated 18.5.95 would not apply to sewing thread.