1997 (6) TMI 239 - AT - Central Excise

Summary

Issues:
- Whether the conversion of single ply cotton yarn into double ply cotton yarn amounts to manufacture and attracts duty liability.

Analysis:
The judgment concerns the issue of whether the conversion of single ply cotton yarn into double ply cotton yarn constitutes manufacturing, thereby attracting duty liability. The appellants, engaged in the manufacture of cotton yarn, were processing single ply cotton yarn into double ply cotton yarn and paying duty on the latter. The Department contended that the conversion process constituted manufacture, necessitating duty payment on both single ply and double ply yarn. The Assistant Collector and the learned Collector (Appeals) upheld this contention. The appellant argued that since they cleared double ply yarn, duty should only apply to that product, citing precedents where similar processes were not considered manufacturing under the old tariff. The respondent, however, maintained that the conversion process amounted to manufacture under Chapter Note 1 of Chapter 52.

The Tribunal analyzed the issue by examining whether the conversion process resulted in a new product or merely a modification of the existing yarn. Referring to past judgments, including those involving similar processes, the Tribunal emphasized that the conversion did not create a new commodity, as the yarn remained the same type even after doubling or multifolding. The Tribunal considered the implications of the Central Excises and Salt Act, 1944, and concluded that duty liability should only arise at the stage of double ply yarn, where the product was cleared for duty payment. The Tribunal set aside the impugned order and allowed the appeal, directing any consequential relief to be granted to the appellant in accordance with the law.

In summary, the judgment clarifies that the conversion of single ply cotton yarn into double ply cotton yarn does not amount to manufacturing a new commodity, as the essential nature of the yarn remains unchanged. Therefore, duty liability is limited to the stage where the double ply yarn is cleared for payment, aligning with past precedents and the provisions of the Central Excises and Salt Act.