1995 (3) TMI 121 - SC - Central Excise

Whether the multifold yarn or doubled yarn prepared by the appellants out of duty paid cotton yarn and nylon filament yarn attracts duty under Item 18A/18E of the Central Excise Tariff? Held that - Every change does not necessarily fall within the expression manufacture unless it is shown that the process has brought into existence and a new product having a distinct identity in the commercial world. In the absence of any evidence in that behalf which the Revenue ought to have laid, we find it difficult to come to the conclusion that excisable goods came into existence by the treatment of cotton and nylon yarn into a multifold yarn. We allow these appeals, set aside the order of the excise authorities as well as the Tribunal and hold that the item multifold yarn for want of evidence, in regard to which we had made a mention has not been shown to be liable to excise duty under the relevant Tariff Entry. It will be for the excise authorities to decide after notice to the appellants whether the excise duty already paid is liable to be refunded in view of Section 11B of the Act.

Summary

Issues:
1. Whether the multifold yarn prepared by the appellants attracts duty under Item 18A/18E of the Central Excise Tariff.

Comprehensive Analysis:
1. The case involved a consideration of whether the multifold yarn or doubled yarn prepared by the appellants using duty paid cotton yarn and nylon filament yarn attracts duty under specific Tariff Entries. The appellants were manufacturers of paper makers cotton dryer felts, and they twisted strands of cotton yarn and nylon filament yarn together to create multifold yarn for weaving felts. The Tribunal had held that the multifold yarn, despite being an intermediary product, was liable to excise duty as it had a distinct identity and was a new product. The Tribunal relied on a previous decision and concluded that the multifold yarn fell under the relevant Tariff Entries for excise duty.

2. The Supreme Court, after hearing the counsels, referred to a previous decision where it was held that to attract excise duty, the manufactured article must be capable of sale to a consumer. The Court emphasized that for an article to be considered "goods" under the Central Excises and Salt Act, it must be something that can be brought to the market for sale. The Court also highlighted that every change in a product does not amount to "manufacture" unless it results in a new product with a distinct identity in the commercial world. In this case, the Revenue failed to provide evidence that the multifold yarn had a distinct identity or marketability. It was noted that the process of manufacturing felts using the multifold yarn was part of a monopoly item, and without evidence of the multifold yarn's distinct identity, it could not be considered liable for excise duty.

3. Consequently, the Supreme Court allowed the appeals, set aside the orders of the excise authorities and the Tribunal, and held that the multifold yarn was not shown to be liable for excise duty under the relevant Tariff Entry due to lack of evidence. The Court directed the excise authorities to determine if the excise duty already paid by the appellants should be refunded in accordance with the relevant provisions of the Act. No costs were awarded in this judgment.