2008 (3) TMI 210 - AT - Central Excise

Cotton polyester blended lungi fabrics - whether padding with starch & the special processes involve a process amounting to manufacture - By applying starch with some chemicals and the special process identified, the fabrics acquire the quality of stiffness and sheets which vanishes after a couple of washes - Such a process which does not bring into existence goods with a new name, properties or uses cannot be held to be manufacture - impugned goods can t be subjected to further duty liability

Summary

Issues:
1. Exemption from duty extended to cotton polyester fabrics.
2. Interpretation of processes specified in the notification.
3. Application of chemical padding and special finishing processes.
4. Assessment of the lasting nature of the processes.
5. Allegations against the Commissioner's decision.
6. Definition of 'manufacture' under the Central Excise Act.
7. Relevance of CBEC Circulars and Board's orders.
8. Compliance with Notification No. 153/82-CX.
9. Determination of duty liability based on the processes involved.

Analysis:
1. The appeal involved the exemption from duty extended to 'cotton polyester blended lungi fabrics' under Notification No. 253/82. The Commissioner dropped the proposal to deny the exemption and confiscate the fabrics processed by M/s. Coimbatore Pioneer Mills Ltd., Erode (CPM), as they were subjected to chemical padding and special finishing processes not specified in the notification.

2. The Commissioner found that the processes undertaken by CPM, including padding with starch and chemicals, did not impart a lasting characteristic to the fabrics. The Board's Circular clarified that the use of chemicals in the padding process could still qualify for the exemption. The Commissioner determined that the special finishing processes added softness and gloss to the fabrics but did not constitute manufacture.

3. The Revenue contended that the chemical padding amounted to a manufacturing process based on the exemption availed by the respondents. However, there was a lack of evidence regarding the use of natural starch in the padding process. The Commissioner's decision to drop penalties under Section 11AC and Rule 173Q was challenged by the Revenue.

4. The Tribunal reviewed the processes involved, including chemical padding and special finishing, to assess their lasting nature and impact on the fabrics. It was observed that the effects of these processes did not have a lasting character on the fabrics, as confirmed by the Board's review order.

5. Referring to relevant legal provisions and precedents, the Tribunal analyzed whether the processes undertaken by CPM constituted 'manufacture' under the Central Excise Act. The judgment highlighted that processes like padding with starch and chemicals, and special finishing, did not meet the criteria for manufacturing activities, as they did not result in goods with new properties or uses.

6. The Tribunal also considered the provisions of Notification No. 153/82-CX, which specified processes exempt from duty for cotton fabrics. The decision emphasized that the impugned processes, such as padding with starch and special treatments, did not trigger additional duty liability under the notification.

7. Based on the comprehensive analysis of the processes involved, their impact on the fabrics, and the legal framework governing exemptions and manufacturing activities, the Tribunal dismissed the appeal filed by the Revenue against the Commissioner's decision. The judgment was pronounced on 17-3-2008.