1993 (4) TMI 172 - AT - Central Excise

Issues Involved:

1. Classification of tops containing more than 50% synthetic fibre and less than 50% wool.
2. Determination of whether blending of wool tops with synthetic fibre constitutes manufacture.
3. Marketability of blended wool tops.
4. Applicability of excise duty on blended wool tops.
5. Correct tariff item classification for blended wool tops.
6. Validity of demand for excise duty.

Detailed Analysis:

1. Classification of Tops Containing More Than 50% Synthetic Fibre and Less Than 50% Wool:

The primary issue in E/Appeal No. 1977/85 was the classification of tops containing more than 50% synthetic fibre and less than 50% wool. The Assistant Collector of Customs and Central Excise, Chandigarh, had classified such synthetic tops under Tariff Item 68. The assessee contended that the classification should be under Tariff Item No. 18 of the erstwhile First Schedule of Central Excises and Salt Act, 1944. The Collector (Appeals) upheld the Assistant Collector's decision, stating, "TI 43 CET covered wool tops containing more than 50% by way of wool. However, synthetic tops are not specified as such in any of the specific tariff entries... these would correctly fall under TI 68 CET."

2. Determination of Whether Blending of Wool Tops with Synthetic Fibre Constitutes Manufacture:

The appellants argued that blending synthetic fibres and wool fibres did not amount to manufacture and thus did not attract excise duty. They cited that the end-product, blended tops, had distinct characteristics, name, and usage different from the two constituents. However, the Collector (Appeals) disagreed, referencing previous judgments, such as "1983 (14) E.L.T. 1853," which held that doubling and twisting of different yarns amounted to manufacturing a new product.

3. Marketability of Blended Wool Tops:

In E/Appeal 2528/91-D, the Revenue appealed against the Collector (Appeals) decision, which held that blended wool tops were not marketable. The Collector (Appeals) stated, "if intermediate product is not marketable, there is no question of excisability." The Revenue contended that blended wool tops were a commercially different product known in the market and argued that the transaction between the assessee and their clients indicated marketability.

4. Applicability of Excise Duty on Blended Wool Tops:

The Revenue argued that the blended wool tops were marketable and thus subject to excise duty. They cited the Supreme Court's decision in "Bhor Industries Ltd. v. Collector of Central Excise," which held that marketability is an essential criterion for dutiability. The assessee countered that the product was not traded in the market and thus not dutiable.

5. Correct Tariff Item Classification for Blended Wool Tops:

The classification of blended wool tops was contested. The Revenue argued that the product should be classified under TI 68, as it did not fit under TI 18-I or TI 43. The learned SDR contended, "classification under TI 68 is correct," and argued that the benefit of Notification No. 119/75 did not apply to the goods.

6. Validity of Demand for Excise Duty:

The original demand was raised for the period from 1-3-1975 to 31-10-1979. The jurisdictional Assistant Collector had initially dropped the proceedings, concluding that blending different kinds of tops was not a manufacturing process and that the blended tops were not generally traded. The Collector (Appeals) relied on this order and expert opinion to support the contention that blending did not result in a new product and thus was not subject to excise duty.

Conclusion:

The Tribunal concluded that the blending of wool tops with synthetic fibre did not result in a new product and was not marketable as such. They stated, "the blended synthetic fibre supplied by the customers are to be blended with the wool tops as per their specifications and after the said mixing, the customers have to put the same into further processes to bring into existence a commercial product." Therefore, the product was not considered a new commodity and not subject to excise duty. Consequently, the assessee's appeal was allowed, and the Revenue's appeal was rejected.

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