1989 (7) TMI 272 - AT - Central Excise

Summary

Issues:
Classification of products emerging after processing yarn, eligibility for excise duty benefits under Notification No. 119/75, interpretation of "manufacture" in the context of job work.

Analysis:
1. The appeals involved the classification of products resulting from processing yarn by the respondents. The Assistant Collector classified the new products under T.I.68 based on distinct constitution, use, and marketability. The appellants argued that the processed yarn remained yarn for all purposes. The Collector (Appeals) allowed the appeals, stating that the respondents were only doing job work and liable for excise duty on the job work carried out.

2. The Revenue appealed the Collector's order, contending that the new products emerging from the processing by the respondents were distinct and not eligible for benefits under Notification No. 119/75. They cited the Aditya Mills Ltd. case where it was held that the emergence of a new product through twisting and doubling constituted manufacture under the Central Excises and Salt Act, 1944.

3. The respondents, represented by Shri Bharucha, argued that the twisting of yarn did not result in a new product, citing judgments like National Organic Chemical Industries Ltd. and Madura Coats Ltd. In Madura Coats Ltd., the High Court held that the yarns did not transform into a new substance, maintaining their original identity even after processing.

4. The Tribunal analyzed the precedents and emphasized the judgment in Aditya Mills Ltd., where the Supreme Court upheld that a new product emerged if the processed material resulted in a distinct commodity with its own character and use. The Tribunal concluded that in the present appeals, the processed yarn lost its original identity, aligning with the definition of manufacture.

5. The Tribunal rejected the argument that the articles should retain their essential identity after processing, as held in NOCIL case, emphasizing that in the current appeals, the processed yarn lost its identity. Consequently, all five appeals were allowed, setting aside the Collector (Appeals) order.

This comprehensive analysis highlights the classification of products resulting from yarn processing, the interpretation of "manufacture" in job work scenarios, and the eligibility for excise duty benefits under relevant notifications, providing a detailed overview of the legal judgment.