2006 (11) TMI 31 - SC - Central Excise

Manufacture Alleged that twisting and doubling of yarn does not result in the emergence of a new commodity under section 2(f) of C.E. Act,1944- Yarn yet to be classifiable under yarn cateogary.

Summary

Issues:
1. Appeal against the Final Order of the Tribunal under Section 35L(b) of the Central Excise Act, 1944.
2. Classification and chargeability of the process of twisting and doubling of cellulosic filament yarn with a blended yarn.
3. Whether the process amounts to manufacture under Section 2(F) of the Act.

Analysis:
1. The appeal was filed by the Revenue against the Final Order of the Tribunal under Section 35L(b) of the Central Excise Act, 1944. The Tribunal had set aside the order passed by the Collector (Central Excise) confirming the demand for duty on the respondent-assessee. The Collector imposed a penalty and ordered confiscation of goods, plant, and machinery.

2. The main issue in the present appeal was whether the process of twisting and doubling of cellulosic filament yarn with a blended yarn comprising polyester and viscose amounts to manufacture under Section 2(F) of the Act and if so, whether it is classifiable under erstwhile Tariff Item No. 68 and chargeable to duty therein. The Collector had confirmed the duty demand, considering the process as manufacturing, while the Tribunal reversed this decision.

3. The Tribunal relied on previous court decisions, such as Porritts & Spencer (Asia) Ltd. v. Collector of Central Excise, New Delhi and Collector of Central Excise, Jaipur v. Banswara Syntex Ltd., which held that doubling or multi-folding of yarn does not result in the emergence of a new commodity. The Tribunal concluded that the process did not amount to manufacture, and the yarn continued to be yarn, hence not classifiable under a different tariff item.

4. The counsel for the Revenue argued that there were contradictory views in different court cases, citing various judgments in favor of both the assessee and the Revenue. However, the Supreme Court clarified that the previous decisions favoring the Revenue were distinguishable on facts, and the issue had been conclusively settled in favor of the assessee in the present case.

5. The Supreme Court referred to previous judgments, including Porritts & Spencer (Asia) Ltd., Banswara Syntex Ltd., Rajasthan Spinning & Weaving Mills Ltd., and Madura Coats Ltd., which all supported the view that the twisting and doubling process did not amount to manufacture. The Court dismissed the appeals, upholding the decisions of the lower authorities and leaving the parties to bear their own costs.