2007 (6) TMI 126 - AT - Central Excise

Manufacture - Issue arises regarding dutiability of the soft cotton waste generated during the processing of ginned cotton into fibres - Appellant contention is that the there is no manufacturing process is involved - Held that said cotton waste is not dutiable

Summary

Issues:
Whether soft cotton waste attracts Central Excise duty.

Analysis:
The appellant, a 100% EOU engaged in manufacturing and exporting cotton yarn, processes ginned cotton into spinnable fiber, resulting in soft cotton waste. The main issue is whether this waste attracts Central Excise duty. The appellant argues that combing and carding processes do not involve manufacturing and that soft waste is non-spinnable fibers and waste material, not a manufactured product. The appellant relies on various legal precedents to support the contention that waste and scrap are not manufactured products. The appellant emphasizes that waste material does not undergo transformation into a new product, a prerequisite for attracting excise duty.

The ld. Counsel points out that cleaning and other operations making a naturally occurring product fit for consumption do not constitute manufacturing activity for excise duty purposes. The appellant also argues that the mere mention of an item in the Excise Tariff does not automatically make it liable for excise duty; the item must result from a manufacturing process. The ld. SDR contends that previous Tribunal decisions support the dutiability of cotton waste under Heading 5202, but the appellant argues that these decisions do not address whether soft cotton waste results from a manufacturing process.

The Tribunal notes that the soft cotton waste arises during the process of combing ginned cotton, involving cleaning and arranging fibers into spinnable lengths. The waste consists of natural fibers and waste materials, resulting from segregation and separation processes. The Tribunal agrees with the appellant that preparing natural products for use and marketability, even with additives, does not amount to manufacturing new products. The Tribunal concludes that the soft waste is not a manufactured item, supported by the High Court ruling that waste material lacks distinct name, character, or use to be treated as a manufactured product.

The Tribunal rejects the Revenue's reliance on previous Tribunal decisions, stating that those cases did not address whether cotton waste results from a manufacturing process. The Tribunal emphasizes that a decision is not authoritative on an issue not raised or considered. The Tribunal clarifies that mentioning an item in the Excise Tariff is only half the requirement for excise duty; the item must also be manufactured or produced in India. The Tribunal decides the appeals on their merits, not addressing other issues like limitation, and allows the appeals with consequential relief to the appellants.