2006 (8) TMI 60 - AT - Central Excise

Manufacture- Lacquering of duty paid on metallised polyster film It doesn t amount to manufacture It classified under sub-heading 5605.10, 5605.90 of CET but as per decision classified under new tariff .

Summary

Issues:
1. Whether lacquering of metallised polyester film amounts to manufacture under the Central Excise Act, 1944?
2. Whether the classification of a special type of yarn manufactured by the appellants is correct under Heading 5605.10 or 5605.90 or should be reconsidered under Heading 5605.00 and relevant HSN Notes?

Analysis:
1. The issue of whether lacquering of metallised polyester film constitutes manufacture under the Central Excise Act, 1944 was examined in light of various legal precedents. The appellant argued that the activity of lacquering should not be considered as manufacture, citing the decision of the Bombay High Court in M/s. Garware Plastics & Polyester Ltd. The Tribunal agreed with this argument, supported by other decisions such as Chemicoat Ltd. and Rexor India Ltd. The absence of specific provisions in the Central Excise Tariff Act, 1985 regarding lacquering as manufacture further strengthened this interpretation. The Tribunal emphasized that the taxable event in cases involving integrated factories arises only after the final stage of production, where all incidental processes are completed. Therefore, the duty demands and penalties related to lacquering were set aside, and the matter was remitted for redetermination of penalties on other issues, if any.

2. The classification of a special type of yarn manufactured by the appellants was another key issue. The Tribunal found that the classification of the yarn should not be limited to Heading 5605.10 or 5605.90 but also reconsidered under Heading 5605.00 and relevant HSN Notes. As the duty demands on the yarn had been reopened for reassessment, the Tribunal concluded that the matter needed to be remitted back to the original authority for reconsideration of the classification under Heading 5605.00. The appellants and the Revenue were to be given an opportunity to present their arguments on the classification issue. The Tribunal relied on the decision of the Apex Court in Voltas Ltd. v. CCE to support its conclusion. Consequently, the matter was remitted to the Commissioner for redetermination of duty demands on the yarn and other issues, with no further action required on the lacquering aspect.

Overall, the appeals were allowed, and the case was remanded for further proceedings as per the detailed analysis provided for each issue.