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TMI Blog1985 (8) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... admissible as the same was not provided in the notifications above said. It was pointed out that woollen yarn is notified in the Schedule to Rule 56A of the Central Excise Rules for grant of proforma credit and not for set off of duty. Pointing out that no permission had been obtained from the Assistant Collector under Rule 56A, the appellants were directed to show cause why Central Excise duty of Rs.4,08,787.96 should not be recovered from them under Rule 10 of the Central Excise Rules. 3. The appellants in reply traced the background, pointing out that initially there was no difference in duty between dyed yarn and grey yarn and permission under Rule 51A had been obtained in 1960 and that it was in 1966 that, for the first time, separate rates of duty were imposed for grey yarn and dyed yarn and thereafter differential duty was being paid in view of notifications issued also for that purpose. It was further pointed out that even after different tariff values and separate rates of duty were notified in 1976 the appellants continued to pay differential duty in view of the earlier practice and notifications and that the same had not been ever objected to by the department. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity for levy of duty on processed yarn (dyed yarn in this case) and that the process of dyeing would not amount to manufacture as defined in Section 2(f) of the Central Excises and Salt Act. The tariff entry as it stood at the relevant time read as follows : WOOLLEN YARN, ALL SORTS INCLUDING KNITTING WOOL, containing not less than ninety per cent by weight of wool calculated on the total fibre content in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power : (1) Worsted Yarn : (a) of 48s counts or more. (b) of less than 48s counts. (2) Others. Shri Raghavan Iyer contended, with reference to the above tariff entry, that as the entry read woollen yarn, all sorts........................ it included all varieties of woollen yarn such as grey yarn, dyed yarn etc. He therefore contended that the tariff entry itself would make the dyed yarn liable for duty as well as the grey yarn. In this connection he relied upon the following passage in The Law of Central Excise-Taraporevala and Parekh (Second Edition) : This expression which occurs in Item 21(2) was construed as not having the same wide amplitude as is conveyed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upon by Shri Harbans Singh was Capital Dyeing Company v. Collector of Central Excise, Chandigarh [1984 (17) E.L.T. 544]. But that decision dealt with liability for payment of base stage duty, over and above the texturing surcharge, by the texturising processors when the plain yarn had been purchased from the market. The decision laid down that in such a case the duty liability on the plain yarn must be held to have been discharged as the same was purchased m the open market and the processor cannot be called upon to pay that duty. Therefore, that decision is not relevant to the question as to whether dyeing would amount to manufacture. Shri Harbans Singh referred to the decision in the Vijay Textiles case (1979 E.L.T. 18) but when it was pointed out that the said decision had been specifically over ruled by the Supreme Court recently in Empire Industries Limited v. Union of India [1985 (20) E.L.T. 179 (S.C.)], he made no further reference to that decision. 9. Shri Raghavan Iyer on the other hand contended that this question, whether dyeing would or would not amount to a process of manufacture, is no longer open to doubt after the decision of the Supreme Court reported in 1985 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rey yarn in the market, traded separately as such and has its distinctive uses. Nor are these facts controverted by the appellants. He therefore contends that in the light of the observations of the Supreme Court the dyed woollen yarn would be a manufactured commodity distinct from the grey woollen yarn, though both may be woollen yarn. Shri Harbans Singh contends that a distinction must be made between grey fabric and printed fabric as against grey yarn and dyed yarn since grey fabric is not normally used as such but only printed fabric, while grey yarn as well as dyed yarn are used to make fabrics. The premise that grey fabric in not used as such in itself is not correct. Therefore, no distinction as suggested by Shri Harbans Singh appears to be called for. 10. Shri Harbans Singh contends that while under the Amendment Act 6/1980 the definition of manufacture in Section 2(f) with reference to particular tariff entries had been amended, there was no such amendment with reference to tariff entry 18B and therefore the processes enumerated in the amended definition with reference to other entries (including process of dyeing) cannot be imported with reference to tariff item 18B as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law. 12. As far as the decision of the Kerala High Court [1978 E.T.C. (42) 201] is concerned it may be noted that [as observed by the Supreme Court in 1985 (20) E.L.T. 179 (SC) in paragraph 25] the Supreme Court had in Commissioner of Sales Tax, U.P. v. Harbilas Rai and Sons [1968 STC (21) 70] observed the word manufacture has various shades of meaning and in the context of sales tax legislation if the goods to which some labour was applied remained essentially the same commercial article, it could not be said that the final product was the result of manufacture . Therefore, the meaning attached to the word manufacture , in the context of sales tax legislation, would not ipso facto apply when the same word has to be construed in the context of excise legislation. We may also take note here of the observations of the Supreme Court in P.C. Cheriyan v. Mst Barfi Devi (1979 E.L.T. J 593) : Before parting with this judgment, we may sound a note of caution, that definitions of manufacture" given in other enactments, such as, in the Factories Act or the Excise Act should not be blindly applied while interpreting the expression manufacturing purposes in Section 106 of the Transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Shri Harbans Singh. Shri Harbans Singh contends that credit under Rule 56 A should be made available to the appellants by us, following our conclusions. In this connection it should be noted that the appellants had all along been denying that Rule 56 A procedure would be applicable to.. their product. We have noted that this contention on the part of the appellants was not .correct as woollen yarn is a specified item (item 9A): under Rale,56A. On the contention of Shri Harbans Singh that under our order we should make provision for we should make provision for credit under rule 56A to the appallants, Shri Raghavan Iyer contends that such a benefit cannot be granted by us under our order. He argues that benefit arising under rule 56A cannot be granted unless the procedure prescribed therefor had been followed. Admittedly in the present instance the said procedure had not been followed. Shri Harbans Singh refers to the observations of the Supreme Court in 1985(20) E.L.T. 179 in para 49 that in the said case proforma credit on the duty already paid was being allowed. The relevant passage reads- Reference has already been made to Rule 56A. Under sub-rule (2) of Rule 56A it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a process of manufacture in relation to cotton fabrics. I do not find any general observation by the Supreme Court that dyeing or colouring of everything else would also be a process of manufacture. On the contrary, in the same judgment in paragraph 33, the Supreme Court has cited two judgments of the Gujarat High Court in which it had been held that- (i) printing and lacquering of plain aluminium tubes was not a process of manufacture of aluminium tubes [1979 E.L.T. (J .3W-Extrusion Process Pvt. Ltd. v. N.R. Jadhav, Superintendent of Central Excise], (ii) colouring of duty paid paper was not a process of manufacture [1980 E.L.T. 164 (Guj.)-Swastik Products, Baroda v. Superintendent of Central Excise}. The Supreme Court observed that the facts of these two cases were distinguishable. The question whether a particular process is a process of manufacture or not , observed the court, has to be determined naturally having regard to the facts and circumstances of each case and having regard to the well-known tests laid down by this court. This was the general principle laid down by the court. The court further reiterated the well-known test saying Any process or processes crea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd. She is only buying woollen yarn of two different shades. Their name and character remain the same. Their use is also common- knitting of the pull-over or cardigan etc. I arrive at the same conclusion when I extend the example to handlooms or mills. They use woollen yam, both grey and dyed, for weaving fabrics. One can see shawls, lois, mufflers, blankets and coating cloth woven from grey woollen yarn as commonly as those woven from dyed woollen yarn. The colour or shade just a matter of choice of the consumer. The name, character and use of the woollen yarn, whether grey or dyed. remain the same. I am, therefore, unable to accept the unsubstantiated contention of the learned representative of the department to the contrary. The well-known test laid down by the Supreme Court has not been satisfied. 22. Of relevance is also the fact that the law and tariff relating to woollen yarn are differently structured as compared to those relating to cotton fabrics. Unlike cotton fabrics, man-made fabrics and cotton yarn, section 2(f) of the Central Excises and Salt Act, 1944 does not equate dyeing, bleaching etc. of woollen yarn to manufacture, nor does the tariff entry for woollen yarn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng into existence a new substance or not. The reasoning is clearly fallacious. The words all sorts have been used to make it clear that vegetable non-essential oils whether raw or refined and from whatever raw material produced will be liable to excise duty." Gujarat High Court in 1980 E.L.T. 164 supra : What Mr. Vakharia appearing for the respondents contends is that the colouring process of the paper purchased by the petitioner would come within the sweep of all other kinds of paper and paper board, not otherwise specified . The words all other kinds of paper* occurring in Tariff Item 17(3) refers to all other kinds of paper manufactured - Colouring a paper which is already manufactured is not a process in the manufacture of paper nor can that process be said to be one incidental or ancillary to the manufacture of paper. If the colouring was in the process of the manufacture of the paper, then it would come within the expression paper all sorts. No manufacturing process is involved by printing on white paper or by colouring manufactured product, namely the paper. We are, therefore, unable to agree with Mr. Vakharia that all other kinds of paper would take in pap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ywood blocks or panels manufactured by the firm can be said to constitute the raw materials of the firm for producing plywood circles and not as the finished product of the firm, the position, in view of the definition of manufacture as given in Section 2(0 of the Act, the provisions of Rule 9 and the provisions contained in Item 16B in the First Schedule, remains unaltered and unaffected, and plywood manufactured for producing circles becomes liable to duty at the block stage or panel stage. No question of double taxation arises as duty is leviable only once on the plywood as it comes out of the press in the panel or block stage and no further duty is to be levied on the circles which are made out of the plywood blocks or panels. It is evident that the Supreme Court went to the extent of saying that whether cutting of plywood panels into circles amounted to manufacture or not, duty under Item 16B could be charged only once. I see no reason why the same rule is not applicable to woollen yarn. 25. I, therefore, hold that there is no evidence laid before us to conclude that dyed woollen yarn is a new substance different from grey woollen yarn in name, character and use and sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... New Shakti Dye Works Pvt. Ltd. and another v. U.O.I, and another.} 47.. ..When the textile fabrics arc subjected to the processes like bleaching, dyeing and printing etc. by independent processors, whether on their own account or on job charges basis, the value for the purposes of assessment under Section 4 of the Central Excise Act will not be the processing charges alone but the intrinsic value of the processed fabrics which is the price at which such fabrics are sold for the first time in the wholesale market. That is the effect of Section 4 of the Act. The value would naturally include the value of grey fabrics supplied to the independent processors for the processing. However, excise duty, if any, paid on the grey fabrics will be given proforma credit to the independent processors to be utilised for the payment on the processed fabrics in accordance with the Rule 56A or 96D of the Central Excise Rules, as the case may be. 49. The conclusion that inevitably follows that in view of the amendment made in Section 2 (f) of the Central Excises and Salt Act as well as the substitution of new Item 19 and Item 22(1) in Excise Tariff in place of the original Items, the contentions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period. The appellants fulfilled the conditions laid down in this behalf in sub-rule (2B). If the appellants had not applied for rule 56A procedure in the past, it was because of the fact that neither they nor the department considered it necessary for them to do so. The department itself had granted them a different procedure by way of set off. It is in such situations that rules of interpretation require us to construe may as shall in sub-rule (2B) and the power of relaxation provided for in the law ought to be exercised to ensure equity and justice. 29.Finally, the learned representative of the department came out with the argument that the aforesaid relaxation was the prerogative of the executive and that it was not open to this Tribunal to direct that it be exercised. 1 must repel this argument. Assessees take recourse to appellate remedies because they felt that they have suffered at the hands of the executive. If the redressal machinery is convinced that relief is merited under the law but cannot grant it, it would defeat the very purpose of setting up that. machinery. 1 find nothing in rule 56A which forbids this Tribunal from directing the executive to grant a benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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