1998 (9) TMI 189 - AT - Central Excise

Summary

Issues:
Classification of non-woven fabrics for duty liability based on dyeing and heat setting process; Interpretation of 'manufacture' under Section 2(f) of Central Excises & Salt Act; Double taxation concern regarding duty liability.

Analysis:
1. The appeal involved a dispute over the classification of non-woven fabrics subjected to dyeing and heat setting for duty liability. The Collector of Central Excise (Appeals) had ruled in favor of the respondent, stating that the process did not amount to manufacture and should be classified under Tariff Heading 56.03, which was challenged by the department.

2. The respondent argued that the process of dyeing and heat setting did not constitute manufacture as per Section 2(f) of the Central Excises & Salt Act and Chapter 56 of the Central Excise Tariff Act. The Assistant Collector disagreed, holding that not all processes need to be defined as manufacture under chapter notes, and approved the classification under Heading 5603.00 for duty imposition.

3. The department contended that the Supreme Court judgments in Ujagar Prints v. Union of India and M/s. Empire Industries v. U.O.I. established that any change resulting in a distinct commercial commodity should be considered manufacture. They argued that the non-woven fabrics, post-dyeing and heat setting, were commercially known as processed fabrics, indicating a transformation justifying duty imposition.

4. The Tribunal considered the arguments and rulings of both parties. The Assistant Collector's view that the dyeing and heat setting process altered the fabric's color and constitution, leading to distinct commercial identities before and after the process, was upheld. The Tribunal disagreed with the Collector (Appeals) and agreed with the Assistant Collector, allowing the appeal against the double taxation concern.

5. The Tribunal referenced the Empire Industries case and the Ujagar Prints case to support the decision that the dyeing and heat setting process constituted manufacture, leading to a commercially distinct product attracting duty liability. The Tribunal's decision aligned with the Assistant Collector's interpretation of the manufacturing process and upheld the duty imposition on the processed non-woven fabrics.

6. Ultimately, the Tribunal allowed the appeal, emphasizing that the dyeing and heat setting process resulted in a transformation significant enough to warrant duty liability, rejecting the Collector (Appeals)'s stance on double taxation and supporting the Assistant Collector's classification under Heading 5603.00 for duty imposition.