2004 (9) TMI 411 - AT - Central Excise

Summary

Issues:
1. Determination of whether the process of washing acrylic knitted fabric cut to size and packing them in polythene bags amounts to manufacture.
2. Classification of the product under CETA sub-heading 5601.22.
3. Interpretation of Note 4 to Chapter 60 of the schedule to the CETA, 1985.
4. Application of the principle of manufacture in the context of the processes carried out by the appellants.
5. Comparison of the product before and after the processes to determine if a new product has been created.
6. Evaluation of the necessity of washing the cover for hygiene purposes.
7. Consideration of the Apex Court judgment in U.O.I. v. J.G. Glass Industries Ltd. regarding the creation of a new product.

Analysis:

1. The primary issue in this appeal was to determine whether the process of washing acrylic knitted fabric and packing them in polythene bags constituted manufacture. The appellants argued that the process did not amount to manufacture.

2. The acrylic knitted fabric was purchased by M/s. Johnson & Johnson, washed, dried, folded to size, and packed in polythene bags with specific monograms. The department contended that the product became ready for use after these processes and should be classified under CETA sub-heading 5601.22.

3. The department relied on Note 4 to Chapter 60 of the CETA, which lists various processes that amount to manufacture. However, the Tribunal noted that washing was not explicitly mentioned as a manufacturing process in the note.

4. The Tribunal emphasized that the key consideration was whether the processes carried out resulted in the creation of a new product. In this case, the product was a washable cover for sanitary napkins used by women from lower strata. The Tribunal found that the essential characteristic of the product, absorbency, remained the same even after washing, drying, and packing.

5. It was determined that the processes of washing, drying, and packing did not result in the creation of a new product. Even without the additional packaging, the acrylic knitted fabric could serve the same purpose as a sanitary napkin cover.

6. The argument regarding the necessity of washing the cover for hygiene purposes was deemed misplaced, as the cover was intended to be washed by the user after use. The Tribunal noted that there was no provision in the relevant chapters that washing, drying, and packing constituted manufacturing processes.

7. In light of the Apex Court judgment in U.O.I. v. J.G. Glass Industries Ltd., where the Court held that branding glass bottles did not create a new product, the Tribunal concluded that the appellants did not engage in manufacturing. Consequently, the impugned order was set aside, and the appeal was allowed.