2010 (10) TMI 19 - SC - Central Excise

Manufacture - Classification of goods - unprocessed knitted or crocheted fabrics - exemption under notification no. 6/2000 - is whether the processes of shearing and back-coating which do not figure in Chapter Note 4 to Chapter 60 of the Tariff Act, would fall within the ambit of any other process referred to in the said note - Held that - It is well settled that general terms following particular expressions take their colour and meaning as that of the preceding expressions, applying the principle of ejusdem generis rule, therefore, in construing the words or any other process , the import of the specific expressions will have to be kept in mind - Therefore, the processes, with which we are concerned in the present appeals must take their colour from the process of bleaching, dyeing, printing, shrink- proofing, tentering, heat-setting, crease-resistant processing, specifically mentioned in the note. It is evident that when a grey fabric is subjected to any of these processes, a permanent or lasting change is brought about in the fabric. - said processes do not amount to manufacture in terms of Note 4 of Chapter 60 of the Tariff Act

Issues Involved:
1. Classification of goods manufactured by the assessee.
2. Whether the processes undertaken by the assessee amounted to "manufacture" under Chapter Note 4 to Chapter 60 of the Central Excise Tariff Act, 1985.
3. Applicability of Excise duty on the goods in question.

Detailed Analysis:

1. Classification of Goods Manufactured by the Assessee:

The core issue was whether the goods manufactured by the assessee, specifically "knitted pile fabrics," were classifiable under chapter sub-heading 6001.12 of the Central Excise Tariff Act, 1985, attracting Nil rate of duty. Both CEGAT and CESTAT had rejected the Revenue's claim and held that the goods were "unprocessed knitted pile fabrics" eligible for exemption from duty.

2. Whether the Processes Undertaken by the Assessee Amounted to "Manufacture":

The Revenue contended that the processes of shearing and electrifying polishing amounted to "manufacture" as per Chapter Note 4 to Chapter 60 of the Tariff Act, which would make the fabric dutiable. However, the Tribunal and the Commissioner (Appeals) held that these processes did not amount to "manufacture" as they did not bring about any irreversible or lasting change in the character of the fabric.

The Tribunal relied on the Supreme Court's decision in Mafatlal Fine Spinning and Manufacturing Co. Ltd. vs. Collector of Central Excise, Bombay, which stated that processes like shearing did not change the grey fabric into a new and commercially different commodity. The processes undertaken by the assessee, including carding, knitting, shearing, and back-coating, were deemed not to induce any permanent change in the fabric.

3. Applicability of Excise Duty:

The Revenue issued a show cause notice demanding Excise duty on the grounds that the fabric was processed. However, the Commissioner (Appeals) and the Tribunal found that the processes did not amount to "manufacture" under Chapter Note 4 to Chapter 60. The Commissioner observed that the processes like shearing and back-coating did not result in a permanent change in the fabric, and hence, the goods were not dutiable under the relevant notifications.

The Tribunal's decision was based on the principle of ejusdem generis, interpreting "any other process" in Chapter Note 4 to mean processes similar to bleaching, dyeing, and printing, which bring about a lasting change in the fabric. Since shearing and back-coating did not fall within this category, the fabric remained classified as "unprocessed."

Conclusion:

The Supreme Court upheld the Tribunal's decision, agreeing that the processes undertaken by the assessee did not amount to "manufacture" under Chapter Note 4 to Chapter 60 of the Tariff Act. Consequently, the fabric was classified as "unprocessed knitted fabric," attracting Nil rate of duty under Notification No.06/2000-CE dated 1st March 2000, as well as under Notifications Nos. 5/99, 9/96, and 18/96. The appeals by the Revenue were dismissed, affirming that the goods were not subject to Excise duty.

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