1989 (8) TMI 182 - AT - Central Excise

Summary

Issues:
The issues involved in this case are the classification of leather products for Central Excise duty under Notification No. 115/75, dated 30-4-1975, and whether cutting tanned leather into various sizes amounts to a process of manufacture disentitling the benefit of the notification.

Classification of Leather Products:
The appellants, the Revenue, sought to restore the original order by the Assistant Collector of Central Excise classifying leather products under sub-heading 4201.90 for Central Excise duty. The respondents, manufacturers of leather articles, contended that their products are entitled to exemption under Notification No. 115/75 as products of the tanning industry.

Contentions of the Revenue:
The Revenue argued that the notification applies to goods falling under Chapter 15 and manufactured in tanning industry factories, not to products made out of leather. They claimed that products of the tanning industry are primary goods like hide or skin leather, falling under Chapters 41 and 15, while the products in question are finished products of leather under Chapter 4201.90.

Contentions of the Respondents:
The respondents maintained that cutting leather strips from tanned leather does not constitute a manufacturing process, and therefore, their products are fully exempted under Notification No. 113/86 and No. 115/75. They argued that their industry qualifies as a tanning industry and should benefit from the notification.

Process of Manufacture:
The main question considered was whether cutting tanned leather into various sizes amounts to a process of manufacture. The respondents, recognized tanners of leather, only cut the leather into sizes as per customer orders, maintaining that this activity does not change the nature of the leather and should not disentitle them from the notification benefits.

Decision:
After examining the contentions and records, the Tribunal found that the cutting of tanned leather into sizes by the respondents did not amount to a process of manufacture. The Tribunal upheld the order of the Collector of Central Excise (Appeals) Bombay, granting the respondents the benefit of the notification. It was concluded that the products remained as straps of tanned leather and did not undergo a change to become a new and distinct product. Therefore, the appeal of the Revenue was rejected, affirming the exemption for the respondents under the relevant notifications.