2004 (7) TMI 130 - AT - Central Excise

Summary

Issues:
1. Whether processing undertaken by the appellant on semi-finished yarn amounts to manufacture as per Section 2(f) of the Central Excise Act.
2. Whether the appellant, a 100% E.O.U., is entitled to the benefit under Notification No. 1/95-C.E.

Analysis:
Issue 1:
The appellant, engaged in manufacturing yarn as a 100% E.O.U., received semi-finished yarn without duty payment under a CT-3 certificate and exported the processed yarn. The dispute arose when duty was demanded on the semi-finished yarn, contending that the processing undertaken did not constitute 'manufacture' as per Section 2(f) of the Central Excise Act. The appellant argued that the term 'manufacture' for export purposes is broader than Section 2(f) and cited a Board Circular supporting this interpretation. The Revenue's position was that since the appellant did not manufacture goods as per Section 2(f), they were not entitled to the benefit under Notification No. 1/95-C.E. The Tribunal noted the circular's clarification that export-related 'manufacture' is wider than Section 2(f) and that the appellant's processing, leading to export, aligned with this interpretation. Consequently, the impugned duty demand was deemed unsustainable, and the appeal was allowed.

Issue 2:
The Revenue's argument hinged on the appellant's alleged ineligibility for the benefit under Notification No. 1/95-C.E. due to not meeting the manufacturing criteria of Section 2(f). However, the Tribunal's analysis, guided by the broader interpretation of 'manufacture' for export purposes, led to the rejection of this argument. The Tribunal emphasized that the appellant's processing activities on the semi-finished yarn, followed by export, were in line with the expansive understanding of 'manufacture' as per the Board Circular. Consequently, the Tribunal set aside the demand for duty and allowed the appeal in favor of the appellant, highlighting the compatibility of the processing activities with the export-oriented manufacturing concept, as per the circular's guidance.