1988 (2) TMI 63 - SC - Central Excise

MANUFACTURE - MAN-MADE FIBRE - POLYESTER FIBRE TOW USED TO MANUFACTURE POLYESTER STAPLE FIBRE - LONG FIBRE CUT INTO SHORTER LENGTHS - NO NEW ITEM FORMED - PRODUCT OBTAINED BY CUTTING IS ALSO MAN-MADE FIBRE - NO DUTY LEVIABLE

Summary

Issues:
Exigibility to taxation on the item concerned under the Central Excises and Salt Act, 1944.

Detailed Analysis:
The case involved a statutory appeal under Section 35-L(B) of the Central Excises and Salt Act, 1944, against an order passed by the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT). The issue at hand was whether there was a requirement to levy duty on the material in question under the Act. The investigation revealed that certain consignments labeled as 'crimpled uncut waste' were cleared and purchased for the manufacture of polyester staple fibre. The Collector determined that the material purchased was actually polyester fibre tow, distinct from staple fibre, making it subject to duty. The respondents appealed this decision to the CEGAT after the Central Board of Excise and Customs.

The distinction between tow and staple fibre was crucial in this case. A circular from the Ministry of Finance (Department of Revenue) clarified that tow, a collection of continuous filaments without twist, is mainly converted into staple fibre. The Tribunal concluded that the material purchased by the respondents was already man-made fibre in running length, and cutting it into staple length did not result in a new and different article of commerce. The question of 'manufacture' was central to the case, with established legal principles stating that 'manufacture' involves bringing into existence a new substance, not just producing a change in a substance. The cutting of long fibre into short fibre, in this instance, did not create a new substance, as the character and use of the man-made fibre remained the same.

The court referred to previous judgments to define 'manufacture' under the Excise Law, emphasizing that the taxable event is the creation of a new substance. Despite the change in the length of the fibre leading to a new name, the respondents did not produce a new product attracting duty liability under the tariff entry. The cutting process did not amount to manufacture, as it did not result in the creation of a new substance. Therefore, the appeal was dismissed, upholding the Tribunal's decision that no duty liability could be imposed on the respondents for cutting the fibre into staple length.