2016 (1) TMI 1058 - AT - Central Excise

Dutiability and classification of Polyester Sewing Thread - Held that - The Polyester Sewing Thread is distinctly known in the market and the yarn purchased by the appellant apparently cannot be marketed or used as the Sewing Thread. The Original Authority held that the only processes adopted by the assessee are dyeing and rewinding of the yarn on cones. Obviously this is not manufactured . How appellants came to the conclusion that the process does not amount to manufacture is not clear. The learned Commissioner (Appeals) while setting aside the order-in-original has categorically observed that a commercially different commodity that is Sewing Thread came into existence by applying the process of dyeing and rewinding of multifold or cabled yarn. We find that there is no material now before us to arrive at a different conclusion. We also find that the issue of dutiability of Sewing Thread was examined and clarified by the Board vide Circular No. 168/2/96-CX., dated 23-1-1996. The Board clarified that the argument that there was a definition of Sewing Thread for all the headings except Heading No. 55.04 for the tariff is not really relevant so far as the dutiability of Sewing Thread is concerned. The dutiability does not arise by virtue of the fact the definition of Sewing Thread was provided for in certain headings, but by virtue of the fact that the process of making Sewing Thread out of single thread/yarn is basically a process of manufacture under Section 2(f). In view of the above discussion, we find that there is no ground to interfere with the findings of the learned Commissioner (Appeals) and accordingly we dismiss the appeal. - Decided against the assessee.

Summary

Issues:
Classification and dutiability of Polyester Sewing Thread produced by the appellants.

Analysis:
The appellants claimed that Polyester Sewing Thread is not liable to duty, arguing that it is a type of cabled/multifolded yarn and the dyeing and winding processes do not amount to manufacture. The Original Authority and the Commissioner (Appeals) held the Polyester Sewing Thread as dutiable. The Assistant Commissioner initially ruled it as non-manufactured, but the Commissioner (Appeals) later held it as a manufactured product. The main issue was whether the processes undertaken resulted in a new product with distinct name, character, and use. The Tribunal found that the Polyester Sewing Thread produced by the appellants was a commercially different product emerging from the processes applied to the yarn. The Tribunal also referred to a Board Circular clarifying the dutiability of Sewing Thread, emphasizing that the process of making Sewing Thread constitutes manufacture under Section 2(f). The Tribunal dismissed the appeal, upholding the findings of the Commissioner (Appeals) regarding the dutiability of the Polyester Sewing Thread.

This case revolved around the interpretation of the legal fiction of "manufacture" under Chapter Note 2 of Chapter 55 of the Tariff. The Tribunal emphasized that the deeming provision of manufacture applies when a new commodity emerges from processes that do not fall under the normal definition of manufacture. The Tribunal noted that the appellants purchased multifold yarn, applied dyeing and rewinding processes, and produced Polyester Sewing Thread, which was distinct from the original yarn. The Tribunal highlighted that the essential character of the product changed through the processes, resulting in a marketable product known as Polyester Sewing Thread. The Tribunal rejected the argument that the yarn and Sewing Thread were the same, emphasizing the distinct name, character, and usage of the final product.

The Tribunal scrutinized the findings of the Original Authority and the Commissioner (Appeals) regarding the dutiability of the Polyester Sewing Thread. It was observed that the Original Authority did not adequately consider whether the processes undertaken resulted in a new product with unique characteristics. The Tribunal agreed with the Commissioner (Appeals) that the processes led to the emergence of a commercially different product, the Polyester Sewing Thread. Additionally, the Tribunal referenced a Board Circular to support the view that the process of making Sewing Thread constitutes manufacture, irrespective of specific headings in the Tariff. Ultimately, the Tribunal upheld the Commissioner (Appeals) decision on the dutiability of the Polyester Sewing Thread and dismissed the appeal brought by the appellants.