TMI Blog1980 (4) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... the Petitioners were allowed to clear nylon twine manufactured by them on payment of the excise duty as specified under the Exemption Notification, Ex. G. From 1st of March, 1975, a new item viz., Item 68 was introduced in the First Schedule to the Central Excises and Salt Act. Under Item 68, all other goods, not elsewhere specified, were to be taxed at the rate mentioned against the Item. Under Item 68, certain goods are excluded from its purview but we are not concerned in the present case with the excluded goods. Item 18 has also been subsequently amended in July, 1977. 3. After Item 68 was introduced in the First Schedule, the Excise authorities contended that nylon twine manufactured by the petitioners was not covered by Item 18 since, according to them, nylon twine was different from nylon yarn. Item 18, according to them, would only cover nylon yarn and not nylon twine. They, therefore, claimed excise duty on nylon twine under Item 68. The petitioners have paid excise duty on nylon twine under Item 68, under protest. Thereafter, on or about 29th of April 1976, the petitioners applied to the Assistant Collector of Central Excise for the refund of the excise duty collected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n' means yarn that has been processed to introduce crimps, coils, loops or curls along the length of the filaments and shall include bulked yarn and stretch yarn. (ii) Cellulosic (iii) Metallized." 5. According to the petitioners, nylon twine is nothing but nylon yarn other than textured yarn. It falls under the category of man-made filament yarn, non-cellulosic and other than textured. Nylon yarn is manufactured from a commercial product known as Caprolactum by treatment of heat and pressure. This material is polymerized. It is then extruded in the form of noodles and chopped into small pellets which are known as polymer chips. These chips, after certain treatment, are melted and pressed through spinnerettes. The filaments so obtained are wound together on bobbins and are further stretched and twisted to produce nylon yarn of various deniers. Usually, nylon multifilament yarn is made up of a number of filaments which are held together by a twist. Nylon twine is produced by giving a ply twist or a cable twist to strands of 210 denier nylon yarn. Nylon twine is mainly used for making fishing nets. 6. In the Encyclopaedia Britannion, Vol. X, (abridged version), Yarn is descr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the Director of Fisheries, Madras, which go to show that nylon twine is considered as a type of nylon yarn used for making fishing nets. They have also annexed two affidavits, one from the Managing Director of Maharashtra Rajya Macchimar Sahakari Sangh Limited and the other from a partner of Maharashtra Fishing Material Company, in which it is stated that nylon twine is a category of nylon yarn. The petitioners had also made available the persons who have made these affidavits for cross-examination at the time of the hearing of the revision application, but the respondents have not cross-examined them. The respondents are, however, relying upon certain affidavits which say that a person who wants to purchase nylon twine asks for nylon twine and not for nylon yarn. 7. Before any product can be put in the residuary Item, it is necessary for the respondents to establish that the product is not covered by any of the other Items which are specified in the First Schedule. They must, therefore, establish that nylon twine is not covered by Item 18 which deals, inter alia, with nylon yarn. The various definitions which have been cited go to show that nylon twine is considered as a speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the subject, generally treat and understand them in the usual course. But once an article is classified and put under a distinct entry, the basis of classification is not open to question. Technical and scientific tests offer guidance only within limits. Once the articles are in circulation and come to be described and known in common parlance, we see no difficulty for statutory classification under a particular entry. The Supreme Court goes on to observe : "When an article has, by all standards, a reasonable claim to be classified under an enumerated item in the Tariff Schedule, it will be against the very principle of classification to deny it the parentage and consign it to an orphange of the residuary clause." In the present case, therefore, if nylon twine is considered by people in the trade as a type of nylon yarn, there is no reason why it should be denied its rightful place under Item 18 and put in the residuary clause. The definitions of the expressions "yarn" and "twine" given in the Standards issued by the Indian Standards Institution referred to above are relevant for this purpose, because these are the specifications which relate to the terms as understood in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show when a new product emerges after the application of a process. Thus, our attention was drawn to Commissioner of Sales Tax v. Dunken Coffee Manufacturing Co. 3S S.T.C. p. 493, which considered the meaning of the word 'manufacture' and held that French Coffee was a new commercial product and the process required to produce it amounted to 'manufacture' within the meaning of clause (17) of Section 2 of the Bombay Sales Tax Act, 1959. A reference may also be made to Deputy Commissioner of Sales Tax v. Pai and Co., 45 S.T.C. p. 58, and State of Tamil Nadu v. Pyare Lal Malhotra, 37 S.T.C. p. 319. The classic test for deciding whether there is 'manufacture' of a new product or not is laid down in McNicol and another v. Pinch, 1906(2) Indian Law Reports K.B, 352. In that case, Darling J. observed that, in a sense, you can only make one thing out of another. The essence of making or manufacturing is that it shall be a different thing from that out of which it is made. In other words, we come back to the same test, namely, whether the product that emerges is something different from the thing out of which it is made. If yarn, after twisting, remains yarn-although it is known as twine-, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. 14. There is, however, sufficient material on record which goes to show that nylon twine manufactured by the petitioners has been treated as a kind of nylon yarn by the people in the trade. It is commonly considered as yarn. Hence it can be classified under Item 18. The respondents have failed to establish that nylon twine must be taxed under Item 68, as it is not convered by Item 18 of the First Schedule. The respondents are the taxing authorities, and they must show that the item in question is taxable in the manner claimed by them. In this connection, a reference may be made to the decision in Deputy Commissioner of Agricultural Income-Tax and Sales Tax, Quilon v. Travancore Rubber and Tea Co., 20 S.T.C. p 520, and the observations of the Bombay High Court in Sanghvi Non-Ferrous Metal Industries v. Union of India and others - 1979 E.L.T. (J 543), at p. 546, to the effect that the burden is on the taxing authorities to show that the item in question is taxable in the manner claimed by them. In any event, there is enough material on record which goes to show that nylon twine has been commercially considered as a special kind of nylon yarn. Hence, in the words of the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of which is putting a beneficient construction on a taxing statute in favour of the subject. 18. Further, this is a case of applicative tariff item, the controversy being circumscribed to find out as to whether a particular item describing the goods, or the general item called "the residuary item", should hold the field for the purpose of fiscal liability. In other words, this is not a case where total exemption from excise liability is sought. Now, as far as Tariff Item No. 18-II(i)(a) is concerned, it is under the Entry which uses a plural as "filament yarns" as distinguished from singulars available in other Entries under Tariff Item No. 18 itself, see Entries 18-III, 18-B, 18-C, 18-D, 18-E and 18-F, which use singular denomination as "yarn". Therefore, it is possible to attach significance to plural and infer that all yarns of the kind are within the contemplation of the Entry; and "twine", being "a netting yarn" or is a specie of the product used mainly for that and such ancillary purposes, is well covered by such language. The use of the plural as "yarns" can be suggestive to the commercial world that all kinds of "yarns" of the type mentioned in the Tariff Item are inten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the goods, nor does it disclose the identity of the goods, everything being left to the applicative adjudications by the Authorities concerned as the Entry embraces universally "all other goods", which is too wide and too general without any descriptive details and being always open to doubt and debate. The importance of specifications by description of the goods cannot but be emphasised when we are virtually in the midst of a commercial explosion all dominated by technological advances. Our age itself is a factory age; products are being turned out every second in new forms and new shapes. The complexity and competitive market may necessitate such general enactments, but in the matters of tax, expediency can hardly be preferred to certainty. The purpose of Central Excises and Salt Act, 1944 is to earn revenue and for that to classify the substances or the manufactured articles according to the general and commercial usage and known denominations of such articles. General Entries in such a field, though called "residuary entries", can hardly subserve that purpose. It is no answer that acting upon the power the Central Government has come out with a big list of exemption Notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
