1996 (7) TMI 301 - AT - Central Excise

Summary

Issues:
1. Whether further cess duty is leviable on jute bags manufactured from duty paid jute fabrics.
2. Whether jute bags constitute a new item of jute subject to cess duty under the Jute Manufactures Cess Act, 1983.
3. Whether the conversion of jute fabrics into jute bags amounts to manufacturing for the purpose of cess duty.

Analysis:

Issue 1:
The appeal challenged the demand for further cess duty on jute bags produced from duty paid jute fabrics. The Collector (Appeals) initially held that imposing additional cess duty on jute bags, for which cess was already paid on the fabrics, would lead to double taxation. The respondents argued that since the raw material (jute fabrics) had already incurred cess duty, the finished goods (jute bags) should not attract additional cess. The Asstt. Collector, however, confirmed the demand for cess duty.

Issue 2:
The appellant contended that jute bags, manufactured from duty paid jute fabrics, qualified as a new item of jute subject to cess duty under the Jute Manufactures Cess Act, 1983. They argued that jute bags were distinct products falling under the definition of "Jute Manufacture" as per the Act. The absence of any exemption from cess on jute manufactures further supported the appellant's position.

Issue 3:
The Tribunal analyzed whether the conversion of jute fabrics into jute bags constituted manufacturing for the purpose of cess duty. It was observed that both jute fabrics and jute bags were classified under the same tariff entry, indicating that the conversion did not amount to manufacturing under Section 2(f). The Tribunal also noted that Trade Notices clarified that when cess was paid on jute fabrics, no additional cess was attracted at the stage of bags made from those fabrics. Consequently, the Tribunal upheld the Collector (Appeals)'s decision, concluding that the conversion did not warrant further cess duty on jute bags.

In summary, the Tribunal dismissed the appeal, emphasizing that the conversion of jute fabrics into jute bags did not constitute manufacturing for the purpose of imposing additional cess duty. The decision was based on the classification of both items under the same tariff entry and the clarification provided in Trade Notices regarding cess levy on jute bags made from duty paid jute fabrics.