2013 (12) TMI 79 - AT - Central Excise

Process Manufacture or not u/s 2(f) of the Central Excise Act, 1944 - Whether the process of cutting of carpet matting in rolls and stitching the edges and providing a lining to the cut sizes, to facilitate use as floor mats, amounts to manufacture and the emerging product is exigible to excise duty Held that - Following Brakes India Ltd. Vs Superintendent of Central Excise 1997 (3) TMI 120 - SUPREME COURT OF INDIA - the cutting of carpet rolls into smaller sizes and subjecting such cut sizes to a process of stitching linings at the edges would not amount to manufacture nor result in emergence of a distinct independent commodity, exigible to duty under provisions of Section 2(f) of the Central Excise Act, 1944 - the end products and the process do not bring into existence any new and distinct product by transformation of the original commodity - therefore, no manufacturing per se or within the meaning of Section 2(f) of the Central Excise Act, 1944, is involved - reference made accordingly and the matter remitted for determination on merits - Decided in favour of Assessee.

Summary

Issues:
1. Whether the process of cutting carpet matting in rolls, stitching edges, and providing lining to facilitate use as floor mats amounts to manufacture and is exigible to excise duty.

Analysis:
The judgment by the Appellate Tribunal CESTAT Chennai involved a reference for resolving a conflict in decisions regarding the classification of processes involving carpet rolls. The issue centered around whether converting carpet rolls into floor mats through cutting, stitching, and lining constitutes manufacturing and attracts excise duty. The Tribunal considered conflicting decisions in previous cases and the interpretation of Section 2(f) of the Central Excise Act, 1944.

The assessee, a manufacturer of floor mats and car mats, purchased imported tufted carpet rolls scrap, cut them into shapes, stitched edges, and sold them as either car mats or floor mats. The adjudicating authority classified car mats under CSH 8708 of CETA, 1985, granting exemption under Notification No.8/2002-CE. For floor mats, the authority classified them under Chapter 5702.19 of CETA, 1985, considering the process of cutting, stitching, and lining as manufacturing under Section 2(f) of the Central Excise Act, 1944, based on previous Tribunal decisions.

The Tribunal compared two previous cases, Trans Asia Carpets Ltd. and Jyothi Carpet Industries, to analyze the manufacturing process involved in converting carpet rolls into smaller mats. While Trans Asia Carpets Ltd. concluded that such conversion did not amount to manufacture, Jyothi Carpet Industries differentiated the two cases, emphasizing the manufacturing aspect. The Tribunal then examined Supreme Court decisions like Brakes India Ltd. and Commissioner of Central Excise, New Delhi-I to determine the definition of manufacturing activities under Section 2(f) of the Central Excise Act, 1944.

Considering the principles established by the Supreme Court and the Tribunal's Larger Bench in previous cases like Anil Dang and Tarpaulin International, the Tribunal concluded that cutting carpet rolls into smaller sizes and stitching linings did not result in a distinct, independent commodity subject to excise duty. Therefore, the Tribunal held that this process did not amount to manufacture within the meaning of Section 2(f) of the Central Excise Act, 1944.

In conclusion, the Tribunal answered the reference by stating that the process of cutting carpet rolls and providing linings to create floor mats does not constitute manufacturing under Section 2(f) of the Central Excise Act, 1944. The matter was remitted to the Regular Bench for further determination, with no costs awarded.