2013 (2) TMI 667 - AT - Central Excise

Benefit of Notification No. 30/2004-C.E., dated 9-7-2004 - job worker converts the yarn in cake form into cone form and clears the same to the appellant s depot - Manufacturing activity or not - held that - As per the Chapter Note 3, various processes undertaken on the yarn specified therein or any other like process would amount to manufacture. The various processes specified converts the yarn from one form to another but nevertheless the product remains yarn only. All these processes are undertaken to make the yarn suitable for weaving of fabrics. The VFY in cake form is not suitable for weaving. Therefore, it has to be converted into cone form before it can be used for weaving. The process of conversion of yarn from cake form to cone form is similar to the processes specified in Note 3 to Chapter 54 and therefore, the said activity would amount to manufacture in our view. It would be evident that it is M/s. Shristi Textiles who are the manufacturers of VFY in cone form and not the appellant who has supplied VFY in cake form and all other materials required for the manufacture including capital goods. The expression manufacture of filament yarn was explained as manufacture of filament of organic polymers produced by polymerization of organic monomers, such as, polyamides, polyesters, polyurethenes, or polyvinyl derivatives or organics. Whether the manufacturer had the facility or not in his factory is a question of fact which needs to be examined by the adjudicating authority. From the perusal of the impugned order, it is seen that the adjudicating authority has not considered any of the issues discussed in proper perspective - Matter remanded back - Decided in favour of assessee.

Summary

Issues involved:
1. Whether the conversion of Viscose Filament Yarn (VFY) from cake form to cone form amounts to manufacture.
2. Whether the appellant or the job worker is considered the manufacturer of VFY in cone form.
3. Whether the job worker is eligible for excise duty exemption under Notification No. 30/2004-C.E.

Issue 1: Conversion of VFY into cone form - Manufacture:
The Tribunal analyzed Note 3 to Chapter 54 of the Central Excise Tariff, which states that any process converting products into another form amounts to "manufacture." The Tribunal found that the conversion of VFY from cake to cone form is essential for weaving and aligns with processes specified in Note 3, thus constituting "manufacture." Previous case laws, such as CCE v. Maharashtra Fur Fabrics Ltd. and Nahar Spinning Mills Ltd. v. CCE, supported this interpretation, confirming that the conversion qualifies as "manufacture."

Issue 2: Determining the manufacturer of VFY in cone form:
Referring to legal precedents like Ujjagar Prints v. Union of India and Cosme Remedies Ltd. v. CCE, the Tribunal concluded that the job worker, M/s. Shristi Textiles, who undertook the conversion process, should be considered the manufacturer. The Tribunal emphasized that excise duty is imposed on production, irrespective of ownership, and highlighted the importance of the party undertaking the manufacturing process in determining liability.

Issue 3: Eligibility for excise duty exemption under Notification No. 30/2004-C.E.:
The Tribunal noted that the job worker's eligibility for duty exemption under the notification hinges on whether the manufacturer has the necessary facilities for filament yarn production. Considering the lack of proper examination by the adjudicating authority and failure to address relevant legal perspectives, the Tribunal decided to remand the matter for a fresh assessment. The Tribunal stressed the need for a comprehensive review of all contentions, including hearing the appellant before issuing a new order.

In the final decision, the Tribunal allowed the appeal by way of remand, indicating that the stay petition was also disposed of. The judgment emphasized the importance of proper examination and consideration of legal principles in determining manufacturing liability and duty exemption eligibility in excise matters.