1998 (7) TMI 647 - AT - Central Excise

Summary

Issues Involved:
1. Whether doubling/multifolding/twisting of yarn amounts to manufacture.
2. Marketability of the doubled/multifolded/twisted yarn.
3. Applicability of the extended period of limitation for demand of duty.

Detailed Analysis:

1. Whether doubling/multifolding/twisting of yarn amounts to manufacture:
The appellants argued that doubling/multifolding of yarn does not constitute manufacture and cited several judicial precedents to support their claim. They referred to the Tribunal's decision in Lal Woollen & Silk Mills Pvt. Ltd. v. CCE, Chandigarh, which held that the process of dyeing does not amount to manufacture as defined in Section 2(f) of the Central Excises and Salt Act. The Tribunal emphasized that the tariff entry does not inherently imply liability for processed yarn unless it explicitly states so. Additionally, the appellants cited their own case [1983 (13) E.L.T. 1216], where it was held that a notification cannot make a product excisable if it is not specified under any tariff item.

The appellants also referenced the Bombay High Court's decision in Union of India v. Piramal Spinning and Weaving Mills, which concluded that intertwining strands of yarn does not create a new product and does not amount to manufacture under Section 2(f) of the Act. They further cited the Supreme Court's decision in CCE v. Banswara Syntex Ltd., which held that mere doubling or multifolding of yarn does not bring a new product into existence.

The Tribunal agreed with the appellants, stating that doubling/multifolding/twisting of yarn does not amount to manufacture and hence, no duty was chargeable at this stage.

2. Marketability of the doubled/multifolded/twisted yarn:
The appellants contended that the doubled/multifolded yarn was not marketable and was not sold by them, thus it should not be considered as goods for excise purposes. They cited the Supreme Court's decision in M/s. Porritts & Spencer (Asia) Ltd. v. CCE, New Delhi, which held that for a product to be excisable, it must have marketability. The Tribunal noted that no evidence was presented to prove that the doubled/multifolded/twisted yarn was marketed or marketable, and thus, it could not be considered goods for excise duty purposes.

3. Applicability of the extended period of limitation for demand of duty:
The appellants argued that the extended period of limitation was not warranted as there was no suppression of facts. They maintained that the process of manufacture was known to the Department, and several audit parties had inspected their factory. The Tribunal found that the appellants had been manufacturing PVC Conveyor Belting for a long time and the process was known to the Revenue authorities. The Tribunal concluded that there was no suppression of facts and thus, the extended period of limitation could not be invoked.

Conclusion:
The Tribunal held that doubling/multifolding/twisting of yarn does not amount to manufacture and no duty was chargeable on the doubled/multifolded/twisted yarn. The Tribunal also found that the product was not marketable and thus, not subject to excise duty. Furthermore, the Tribunal concluded that the extended period of limitation was not applicable as there was no suppression of facts. Consequently, the appeal was allowed, and any consequential relief was to be provided in accordance with the law.