TMI BlogFabric cut into Dhoties – no manufacture – confirms the Supreme Court.X X X X Extracts X X X X X X X X Extracts X X X X ..... Fabric cut into Dhoties – no manufacture – confirms the Supreme Court. - By: - CA DEV KUMAR KOTHARI - Central Excise - Dated:- 30-7-2016 - - Rule 12(B) of C.E. Rules . Circular No. 557/53/2000-CX dated 03.11.2000 , Commissioner of Central Excise, Cochin Versus M/s. Kitex Ltd. 2016 (7) TMI 1075 - SUPREME COURT As discussed later on this is again a case of un-necessary litigation by revenue. In this case first of all appeal should not have been preferred, even if it was preferred, a case status report should have been prepared and the appeal should have been withdrawn. Instead of that we find that the revenue engaged five senior counsels and the respondent to protect himself had to engage similar strength of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsels. On reading of the judgment of the judgment of the Supreme Court we find that there was no arguments from any side. On plain reading of the judgment of Tribunal and relevant Rule and Circular and in view of precedence relied on by Tribunal. The Supreme Court dismissed the appeal. In this case high cost could have been awarded in favour of respondent, however, no cost was awarded. Such un-necessary litigation must be avoided and in case of need appeals by revenue should be withdrawn to avoid brain drain. Cloth cut into different kind of pieces: Cloth is manufactured in long length. Some standard sizes of length of different type of cloth is prevalent at stage of manufacture. These are called THAN in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade. Even traders who purchase cloth in THAAN cut them into pieces for selling. For example a wholesaler purchases large quantity of cloth in thaans, he sells some small quantities of thaan to retailers. In some cases even thaan is a larger quantity so he make suitable pieces and sell then as cut pieces. Some items are sold to artisans who purchase cut pieces and then carryout some work of stitching, designing to make them suitable for particular purposes. Examples of cloth cut for different purposes : Dhoti- these can be for men called Dhoti, for women (called saree-dhoti). Pant/ trouser pieces. Shirt pieces. Safari suit pieces. Suit pieces. Salvar Suit pi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eces. Kurti pieces. Blouse pieces. Saaya/ Petticoat paces. Handkerchief (Rumal pieces). Scrubber cloth. Mop cloth for manual cleaning and also for use in vacuum cleaners for domestic use. Mop cloth for manual cleaning and also for use in vacuum cleaners for industrial use and use in public palces. Black board scrubbers. Cloth for vehicle cleaning. There is no manufacture in such activities: Cutting to short length and width, stitching ends of cut cloth (turpai), adding supporting cloth ( falls on saree) ironing, folding and packing etc. done not amount to manufacturing activity. These activities are required to make larger cloth ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rketable in smaller sizes. Value addition is not because of manufacture but because of selling in smaller quantity- a trading aspect and not manufacturing aspect. These activities should not even be deemed as manufacturing. Because under law also some ground realities must be recognized and law should not be amended or designed simply to maximize revenue. The case before the Supreme Court: In the case of Kitex Ltd. (Supra) the revenue has challenged the order of Tribunal before the Supreme Court. The Tribunal has rendered its judgment based on facts. The Supreme Court held as follows: We have gone through Rule 12(B) as well as the Circular relied upon by the Tribunal and find that the said Rule a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well as the Circular are rightly interpreted by the Tribunal . We, thus, do not find any merit in this appeal and the same is, accordingly, dismissed. The relevant portion of the judgment of the Tribunal is reproduced below with highlights added for analysis: Therefore, when the job worker returns the processed goods to the appellants, that amounts to clearance and the duty liability crystallizes at that stage . As per the Board's clarification and the circular issued, the valuation is done on the basis of the principles enunciated in the Ujagar Prints case. That means the value to be adopted for payment of duty is basis of the raw materials cost plus the job charges. After receiving the materials, the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant simply cuts them and packs them and then thereafter he sells the same. In that process, definitely there is value addition but in terms of Rule 12B and the Board's Circular, the value to be adopted is only the value at the end of the job workers premises . Moreover, the processes undertaken by the appellant do not amount to manufacture. Therefore, we hold that the appellants discharged the duty liability correctly and there is no merit in the demand of the revenue for fixing the duty liability on the sale value of the goods sold by the appellant . That is completely against the provisions of Rule 12B read with Board's Circular. Therefore, the major demand amounting to ₹ 46 lakh cannot be sustained. From readi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the above order of tribunal it is clear that the Tribunal has found factually that there was no manufacture. Furthermore Tribunal has also found that the liability was correctly discharged in terms of the relevant Rule and Circular and Tribunal also followed judgment of the Supreme Curt in case of Ujagar Print. Therefore, in this case revenue should not have challenged the order of CESTAT. In this case question arises is whether senior counsels are also only interested in increasing their work. Because in this case we find that five senior counsels appeared for the appellant (Revenue). Whereas in this case revenue should not have been advised to file an appeal and even if appeal was filed, when case was fixed for hearing, it s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould have been reviewed and status report should have been prepared. From the reported judgment we do not find a single word spoken by counsels for revenue. Therefore, it was a fit case for withdrawal of appeal by revenue so that lot of time of honourable Supreme Court could have been saved. But in that case counsels would not have earned fees as they could by presenting themselves in team of five learned senior counsels. This only indicates that personal interest is considered of prime importance and there is no end of greed. The respondent had also to be prepared to contest the matter so he also engaged five senior counsels. However, as per reported judgment they also need not to have to speak a single word and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... honourable judges, themselves, on bare reading of judgment of the Tribunal and relevant Rule and Circular came to conclusion that order of Tribunal was correct. Un-necessary litigation: It is high time that a check should be put on un-necessary litigation initiated by government and its authorities. Though that would not be in interest of author himself also, but author feels that we must avoid wastage of human resources, if there is no such litigation, there will be no brain drain. An intelligent person with zeal to work will definitely find more productive work, then litigation. Unfortunately unproductive work like such litigation is more remunerative than jobs of scientists, doctors and engineers. It is very unfortunate that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in our country legal brains including many of them who master in dragging cases in courts, are rewarded ten to twenty times or even more than scientists and other professionals. This was a fit case where honourable Supreme Court could have awarded costs in favour of respondents who had to prepare case and engaged five senior counsels to face equally senior five counsels of revenue. 2016 (7) TMI 1075 - SUPREME COURT Commissioner of Central Excise, Cochin Versus M/s. Kitex Ltd. Manufacturing activity or not - fabric cut into Dhoties - process like cutting to short length, stitching ends, ironing, folding and packing resulting in enhancement the value of product - Held that:- The Tribunal in the impugned jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment has arrived at a finding that after receiving the product from job worker, at whose end excise duty is duly paid, the assessee simply cuts them into Dhotis and, therefore, in terms of Rule 12(B) read with Circular No. 557/53/2000-CX dated 03.11.2000, it will continue to be classifiable as fabric under Chapter 52/54/55 and such a process undertaken by the appellant does not amount to manufacture. - Order of tribunal held as correct - Decided against the revenue. No.- Civil Appeal No. 4577 of 2008 Dated.- July 18, 2016 A. K. Sikri And Rohinton Fali Nariman, JJ. For the Appellant : Mr. A. K. Sanghi, Sr. Adv. Ms. Sunita Rani Singh, Adv. Ms. Binu Tamta, Adv. Mr. B. Krishna Prasad, Adv. Mr. Rajiv Singh, Adv. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Respondent : Mr. V. Lakshmikumaran, Adv. Ms. L. Charanaya, Adv. Mr. Hemant Bajaj, Adv. Mr. Anandh K., Adv. Mr. M. P. Devanath, Adv. ORDER The issue involved in the present appeal is whether the impugned goods returned from the premises of job worker after processing under Rule 12B, subjected to further manufacturing process like cutting to short length, stitching ends, ironing, folding and packing resulting in enhancement the value of product, are to be assessed at transaction value (value at which assessee cleared the goods to the customer) or at cost of grey fabric and job charges in terms of judgment in the case of M/s. Ujagar Prints. The Tribunal in the impugned judgment has arrived at a finding that after r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceiving the product from job worker, at whose end excise duty is duly paid, the assessee simply cuts them into Dhotis and, therefore, in terms of Rule 12(B) read with Circular No. 557/53/2000-CX dated 03.11.2000, it will continue to be classifiable as fabric under Chapter 52/54/55 and such a process undertaken by the appellant does not amount to manufacture. The relevant discussion in this behalf reads as under: - Therefore, when the job worker returns the processed goods to the appellants, that amounts to clearance and the duty liability crystallizes at that stage. As per the Board's clarification and the circular issued, the valuation is done on the basis of the principles enunciated in the Ujagar Prints case. That means the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue to be adopted for payment of duty is basis of the raw materials cost plus the job charges. After receiving the materials, the appellant simply cuts them and packs them and then thereafter he sells the same. In that process, definitely there is value addition but in terms of Rule 12B and the Board's Circular, the value to be adopted is only the value at the end of the job workers premises. Moreover, the processes undertaken by the appellant do not amount to manufacture. Therefore, we hold that the appellants discharged the duty liability correctly and there is no merit in the demand of the revenue for fixing the duty liability on the sale value of the goods sold by the appellant. That is completely against the provisions of Rule 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2B read with Board's Circular. Therefore, the major demand amounting to ₹ 46 lakh cannot be sustained. We have gone through Rule 12(B) as well as the Circular relied upon by the Tribunal and find that the said Rule as well as the Circular are rightly interpreted by the Tribunal. We, thus, do not find any merit in this appeal and the same is, accordingly, dismissed. - Reply By Ganeshan Kalyani as = Sir, nice article, interesting to know the practical approach. Thanks. Dated: 1-8-2016 - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
