2004 (5) TMI 333 - AT - Central Excise

Summary

Issues:
1. Whether winding single ply yarn from cops/bobbin stage into cones amounts to a new product or process of manufacture?
2. Whether the duty can be demanded again on the yarn at bobbin stage after already being paid on cones?
3. Interpretation of Chapter Note 1 of Chapter 52 of C.E. Tariff Act regarding the process of manufacture.

Analysis:

Issue 1:
The appeal contested the Order-in-Appeal noting that winding single ply yarn from cops/bobbin into cones does not bring about a material change in the product's name, character, or usage, as the yarn remains the same. The Revenue argued that this process constitutes a manufacture under Chapter Note 1 of Chapter 52 of C.E. Tariff Act. The Tribunal referred to the case of Shri Ayyappa & Co. v. CCE, Coimbatore, where winding thread on cones was considered a manufacturing process. However, the Tribunal distinguished this case, emphasizing that no new goods emerged from the process in question. The judgment of Birla Transasia Carpet Ltd. v. CCE, Meerut was also cited but deemed inapplicable. Ultimately, the Tribunal upheld the Commissioner's findings that no new goods were produced from the winding process, and therefore, the duty could not be imposed again.

Issue 2:
The Revenue contended that duty should be imposed on the yarn at bobbin stage after already being taxed on cones, citing Chapter Note 1 of Chapter 52. However, the Tribunal found that no evidence was presented by the Department to demonstrate the marketability of goods at the spindle stage. It was established that the goods were only marketable at the cops/bobbin stage. Relying on precedents like CCE, Jaipur v. Sidha Syntex Ltd. and Modern Mills Ltd. v. CCE, Bombay, the Tribunal concluded that no transformation occurred from one finished product to another when winding yarn on bobbins for further processing. The Tribunal supported the Commissioner's decision that the single ply yarn had already been taxed and could not be taxed again, deeming the order lawful and dismissing the appeal.

Issue 3:
The interpretation of Chapter Note 1 of Chapter 52 of C.E. Tariff Act was crucial in determining whether the winding process amounted to a manufacturing activity. The Tribunal analyzed various precedents and rulings to establish that the winding of single ply yarn did not result in the production of new goods. While acknowledging that the winding process could be considered a manufacture under the tariff act, it was emphasized that such a process should lead to the creation of distinct products. As no new goods were generated by winding the yarn on bobbins, the Tribunal affirmed the Commissioner's decision that the duty could not be levied again on the same product, maintaining the legality and correctness of the order.