1988 (6) TMI 203 - AT - Central Excise

Summary

Issues Involved:
1. Withdrawal of benefit under Notification No. 119/75.
2. Classification of the resultant product (Fancy Yarn) as a new product.
3. Application of the principle of manufacture in its primary sense.
4. Applicability of the precedent set by the National Organic Chemical Industries Ltd. case.
5. Consideration of the Madura Coats Ltd. case.

Detailed Analysis:

1. Withdrawal of Benefit under Notification No. 119/75:

The appellants were initially permitted to avail the benefit of Notification No. 119/75 and pay duty on job charges as per the classification list approved on 20-12-1979. However, the Assistant Collector later amended the classification list on 16-1-1980, disallowing the benefit without giving a hearing to the appellants. The appellants paid the duty under protest and requested provisional assessment, which was refused.

2. Classification of the Resultant Product (Fancy Yarn) as a New Product:

The Tribunal examined whether the process of doubling and twisting yarn amounted to the manufacture of a new product. The department argued that the resultant product, Fancy Yarn, was a new variety with a distinct commercial identity and use, thus classifiable under residuary item 68 of the Central Excise Tariff.

3. Application of the Principle of Manufacture in its Primary Sense:

The Tribunal referred to the decision in the National Organic Chemical Industries Ltd. case, which emphasized that the process applied by the job worker should not be in the nature of manufacture in its primary sense. The resultant product should not lose its essential identity entirely but retain it subject to the manufacturing process.

4. Applicability of the Precedent Set by the National Organic Chemical Industries Ltd. Case:

The Tribunal noted that the National Organic Chemical Industries Ltd. case involved a chemical reaction resulting in a new product where the original identity was lost. This principle was applied to determine whether the process of twisting yarn could be considered manufacture in its primary sense.

5. Consideration of the Madura Coats Ltd. Case:

The Tribunal also considered the Madura Coats Ltd. case, where it was held that no new product was manufactured if the original materials could still be perceived in the final product. The Tribunal found that in the present case, the original yarns were still perceivable in the Fancy Yarn, similar to the Madura Coats Ltd. case.

Separate Judgments:

Majority Opinion (V.T. Raghavachari and G. Sankaran):

The majority held that the benefit of Notification No. 119/75 was not available to the appellants. They concluded that the resultant yarn was a new product arising from manufacture in its primary sense, thus not qualifying for the notification's benefit. Consequently, the appeal was dismissed.

Dissenting Opinion (K. Prakash Anand):

K. Prakash Anand disagreed with the majority, arguing that the facts were similar to the Madura Coats Ltd. case, where the original materials were still perceivable in the final product. He opined that the process did not result in a new product in the primary sense of manufacture and allowed the appeal.

Final Order:

In view of the majority opinion, the benefit of Notification No. 119/75 was not available to the appellants for the subject goods cleared by them. Accordingly, the appeal was dismissed.