1987 (2) TMI 82 - AT - Central Excise

Summary

Issues Involved:
1. Whether the use of hydro-extractor and electrically operated blower constitutes manufacturing the yarn with the aid of power.
2. Whether the dyeing of grey yarn to coloured yarn amounts to manufacture u/s 2(f) of the Central Excises and Salt Act, 1944, inviting fresh duty.

Summary:

Issue 1: Use of Hydro-extractor and Blower as Manufacturing Process

The Tribunal examined whether the use of hydro-extractor for squeezing excess water and an electrically operated blower for drying dyed yarn could be regarded as manufacturing activities. The appellants argued that these processes were merely for drying and did not constitute manufacturing. They cited various judgments to support their contention that no new product emerged from these processes. The Tribunal noted that the manufacture of dyed yarn was complete before these processes and that drying in the open yard or manual squeezing would not attract duty. It concluded that the use of mechanical equipment for drying or squeezing did not constitute manufacturing activities. Thus, the Tribunal held that the use of hydro-extractor and blower did not amount to manufacturing yarn with the aid of power.

Issue 2: Dyeing of Grey Yarn to Coloured Yarn as Manufacture

The Tribunal considered whether dyeing grey yarn to coloured yarn constituted manufacture u/s 2(f) of the Central Excises and Salt Act, 1944. The appellants argued that dyeing did not create a new commercial commodity and relied on various rulings to support their claim. However, the Tribunal noted that grey yarn and dyed yarn were distinct commercial commodities with different uses and market identities. The Tribunal referred to the Supreme Court's decision in Empire Industries Ltd. v. Union of India, which held that processes like dyeing amounted to manufacture. The Tribunal concluded that dyeing grey yarn to coloured yarn did constitute manufacture, making the dyed yarn a distinct excisable commodity.

Conclusion:

The Tribunal allowed the appeal on the first issue, holding that the use of hydro-extractor and blower did not constitute manufacturing activities. However, it upheld the view that dyeing grey yarn to coloured yarn amounted to manufacture, making the dyed yarn subject to fresh duty. The majority decision on the first issue led to the appeal being allowed.