TMI Blog1981 (10) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... n of these fabrics contains in the weft yarn 82% cotton yarn and 18% Twinkle Nylon Yarn. The petitioners have paid the duty for the cotton yarn as well as for the fabrics which is prepared from the weft yarn. The petitioners have also paid a compounded duty on the yarn used in making cotton fabrics. The petitioners purchase the duty paid Twinkle Nylon Yarn from the open market. In the classification list submitted by the petitioners on August 14, 1973 and January 17, 1975 the process by which the weft yarn is manufactured is specifically set out. On September 20, 1971 the petitioners applied for permission to avail of the special procedure under Rules 96A, 96L and 96V of the Central Excise Rules, and in accordance with this application, the requisite permission was granted from time to time. 3. On March 17, 1972, by Finance Act of 1972 Tariff Item 18E was introduced in the First Schedule to the Central Excise Act and by this Item duty was levied on yarns of all sorts not elsewhere specified". After the Tariff Item 18E was introduced, the petitioners filed classification list on August 14, 1973 and set out the process by which weft yarns was manufactured. Even this classification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abrics and out of the fabrics so manufactured certain quantity was attached under the panchanama and that is liable to confiscation. The show cause notice, therefore, called upon the petitioners to explain as to why the duty amounting to Rs. 5,06,710/- and Rs. 9,94,272/- should not be recovered under Rule 9(2) of the Rules and certain fabrics should not be confiscated under Rule 173-Q and a penalty should not be imposed under Rules 226, 52A, and 173-Q of the Rules. The petitioners thereafter approached this Court by filing the present petition on March 29, 1976, and the petition was admitted on the same day. 5. The petition came up for hearing before Mr. Justice Lentin on February 4, 1980, and the learned Judge directed the Department to adjudicate the show cause notice without reference to the Tariff Advice and the Trade Notice. The learned Judge adjourned the hearing of the petition till the disposal of the adjudication proceedings by the Department. The petitioners filed their detailed reply to the show cause notice on March 25, 1980, and claimed that the process undertaken by the petitioners for weft yarn could not lead to the manufacture of new product. The petitioners also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh a process of inter-twining nylon yarn round cotton yarn was not covered under Tariff Item 18A as cotton yarn but under Tariff Item 18E as yarn not elsewhere specified. Respondent No. 6 also held that the claim of the petitioners that the weft yarn or twinkle yarn was not a new product nor the process amounts to a manufacture was without any merit. Respondent No. 6 also rejected the contention of the petitioners that as the entire weft yarn was consumed in the factory itself for the production of the end product, i.e, fabric, the excise duty was not leviable. The challenge of the petitioners that Rule 9(2) was not attracted because the removal was not clandestine was also turned down, so also the ground of limitation urged to claim that the show cause notice was issued after the prescribed period. 8. Shri Andhyarujina, the learned Counsel appearing in support of the petition, has broadly raised three or four contentions to challenge the legality of the order. The learned Counsel urged that the product weft yarn or the twinkle yarn was not a new product and the process undertaken by the petitioners would not amount to a manufacture as contemplated under Section 2(f) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There cannot be any dispute that an appeal lies against the order passed by respondent No. 6 on May 26, 1981. Shri Andhyarujina submitted that even on the previous occasion this objection was raised on behalf of the Department but this Court permitted the amendment and allowed the petitioners to challenge the legality of the order and there is no reason why an identical course should not be followed. Apart from the submission of Shri Andhyarujina, I inquired from Shri Dalal as the whether the Appellate Collector is willing to dispose of the appeal on merits within three months from the date the petitioner lodges such appeal. Shri Dalal at one stage agreed to do so, but showed his inability to assure that the appeal would be disposed of on merits and not on the ground of limitation. Shri Dalal felt that as the period provided for filing the appeal is over the Appellate Authority is not bound to condone the delay and hear the appeal on merits. As Shri Dalal was not inclined to make a statement that the Appellate Authority would dispose of the appeal on merits, in my judgment, the preliminary objection raised by him could not be entertained. Accordingly, preliminary objection is over- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a degree of processing, it must be regarded as still retaining its original identity." The learned Judge referred with approval to a passage from the decision of the American Court in the case of Anheuser-Busch growing Association v. United States, (1907) 52 L. Ed. 336, in paragraph 10, and the passage reads as under : "Manufacture implies a change, but every change is not manufacture, and yet every change in an article is the result of treatment, labour and manipulation. But something more is necessary. There must be transformation; a new and different article must emerge, …… " "having a distinctive name. character or use." "At some point processing and manufacturing will merge. But where the commodity retains a continuing substantial identity through the processing stage we cannot say that it has been 'manufactured'." From this decision it is obvious that every process is not necessarily a manufacture and where there is no essential difference in identity between the original commodity and the processed article, it is diffcult to hold that the another product was manufactured. 11. Another decision of the Supreme Court to which reference can be usefully made is report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to existence and the petitioners have paid duty on the end product also. The dispute is as to whether a new product comes into existence by blending or twisting of nylon yarn and the cotton yarn. There is no dispute between the parties about the process undertaken by the petitioners. The cotton yarn manufactured by the petitioners is taken to a machine called "Doubler Winder Machine". In the said machine, one strand of the cotton yarn is fed with one strand of the nylon yarn to form into a "Cheese" which is subsequently fed to a Doubling Machine where a few turns are given to the parallel yarns (cotton and nylon) and wound on a wooden pirn. The pirn in its turn, is fed on the loom as weft yarn by inserting the pirn in the shuttle on the loom. This is one uninterrupted process The process starts with the Doubler Winder Machine and ends with the emergence of the cloth. 13. At this stage it would be also convenient to make a reference to the affidavits filed by some of the textile experts in yarn. Shri Shantaram Govindrao Vinzanekar, is a Professor and Head of the Textile Manufactures Department of Victoria Jubilee Technical Institute, Matunga, Bombay, and holds a Masters Degree of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comes into existence. Shri Andhyarujina is right in his submission that the process adopted by the petitioners could not be treated by holding as manufacture under Section 2(f) of the Act. Shri Andhyarujina submits that the weft yarn in question was nothing but a combination of two duty paid yarns and the weft yarn was neither spun nor made capable of being used in the weaving of fabrics, Shri Andhyarujina invited my attention to the decision of the Supreme Court reported in (1975) 35 S.T.C. 634 in the case of Commissioner of Sales Tax, U.P. v. Sarin Textile Mills, and pointed out that yarn is not being defined either in the Act and the Rules or under any notification. According to the Oxford Dictionary yarn means "Any spun thread specially of kinds prepared for weaving, knitting or rope-making". While Webster's New World Dictionary defines it as "Any fibre, as wool, silk, flax, cotton, nylon, etc., spun into strands for weaving, knitting or making thread". The Supreme Court, after quoting The dictionary meanings, observed that the fibre in order to answer the description of 'yarn' in the ordinay commercial sense must have two characteristics firstly, it should be a spun strand, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned. 15. There is another aspect of the matter which cannot be overlooked. It is not in dispute that the process of blending adopted by the petitioners was unique in the case of the petitioner Mill and such blended yarn was not available in the open market. It is also not in dispute that the blended material was totally consumed by the petitioners in their own Mills for the purpose of production of end product i.e., fabrics. The affidavits filed by the petitioners of traders dealing in textiles and yarns clearly indicate that the twinkle yarn was not a product known in the trade circles, nor it was available in market. With this background it is obvious that the product was not known in the trade circles as a distinct or a separate product, and the conclusion of respondent No. 6 that by blending the cotton yarn and the nylon yarn a new product has emerged is not correct. 16. In this connection the reliance by Shri Andhyarujina on the decision of the Division Beach of this Court reported to 980 E. L. T. 249 in the case of Garware Nylons Ltd. v Union of India and Ors. is appropriate. The Division Bench was considering the question as to whether the nylon twine falls under Item 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India and Others. Shri Dalal on the other hand submitted that the decision of the Division Bench of this court was rendered in respect of procedure which was available prior to the year 1968 and could have no application to the Self Removal Procedure as provided by the Rules for the period subsequent to the year 1968. The learned Counsel invited my attention to Rule 173-G(2) proviso-I and to Rule 52-A(2) proviso of Central Excise Rules and also to Rule 6(b) of the Central Excise Rules 1975 in support of his submission. Shri Dalal urges that Mr. Justice Tulanpariar, as he then was, had taken a view in Miscellaneous Petition No. 491 of 1964 decided on April 30, 1970, that Rule 9 read with Rule 49 does not contemplate removal of product outside the factory premises. The learned Counsel also pointed out that the Division Bench of Gujarat High Court has taken a contrary view to that of the Delhi High Court in the decision reported in 1978 (2) E.L.T. (J 618) in the case of Maneklal Harilal Spg. and Mfg. Co. Ltd. Ahmedabad v. Union of India and Others. In my judgment, it is not necessary to determine this controversy in the present petition in view of my finding on the main issue. 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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