1993 (10) TMI 171 - AT - Income Tax

Summary

Issues:
1. Whether the appellants' activity amounts to 'Manufacture' within the meaning of Section 2(f) of the Central Excises and Salt Act, 1944?
2. Whether the appellants' product described as 'Velvet Sticker Kum Kum' could be deemed as 'Kum Kum' covered by Notification No. 235/86 (as amended)?

Analysis:
1. The appeal challenged the Collector of Central Excise (Appeals), Bombay's decision rejecting the claim that the product 'PVC Gummed Velvet Stickers Kum-Kum' was exempted under Notification No. 235/86. The Collector held that the product, known as 'Bindi' in the market, could not be deemed as 'Kum Kum' as per the notification, which traditionally refers to 'Sindur (Vermilion)' used by Hindu ladies. The appellant argued that their activity did not constitute 'manufacture' as they only cut fully manufactured strips with PVC Velvet Stickers for pasting on cards. Even if 'manufacture' was accepted, they claimed exemption under Notification 235/86 based on a previous Tribunal order regarding 'Kum Kum Pencil.'

2. The respondent contended that the appellant's claim of not 'manufacturing' was an afterthought, as declared earlier. They argued that the product, PVC Velvet gummed sticker or 'Bindi,' was distinct from 'Kum Kum,' traditionally 'Sindur' or 'Vermilion.' The Tribunal analyzed previous judgments and notifications to determine the classification of 'Kum Kum' under Heading 3307 and its coverage under Notification No. 235/86. The Tribunal referred to the common parlance understanding of 'Kum Kum' and concluded that only specific items used by Hindu ladies over time could be deemed as 'Kum Kum' under the notification.

3. The Tribunal referred to a previous order regarding the classification of 'Kum Kum' and observed that items like coloured powder and circular stickers known as 'Kum Kum' were used by Hindu ladies. The Tribunal interpreted the Notification No. 235/86 and emphasized the importance of common parlance understanding in taxing statutes. It concluded that the disputed product, despite being named 'Kum Kum Pencil,' did not align with the common or trade understanding of 'Kum Kum.' Therefore, the product did not qualify for exemption under the notification, as it was not known as 'Kum Kum' in common parlance.

4. The Tribunal found that the appellants' product fell under the coverage of Notification No. 235/86 and did not delve into the 'manufacture' aspect due to this finding. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellants.

This detailed analysis outlines the legal arguments, interpretations of relevant provisions, and the Tribunal's reasoning leading to the decision in favor of the appellants based on the classification and understanding of the term 'Kum Kum' under the applicable notification.