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PETITIONER: COLLECTOR OF CENTRAL EXCISE, BOMBAY-II

       Vs.

RESPONDENT: KIRAN SPINNING MILLS, KOLSHET ROAD, THANE

DATE OF JUDGMENT15/02/1988

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) RANGNATHAN, S.

CITATION:  1988 AIR  871            1988 SCR  (2)1006  1988 SCC  (2) 348        JT 1988 (1)   369  1988 SCALE  (1)356

ACT:      Central  Excise  and  Salt  Act  1944:  Section  35L  & Ministry of  Finance Notification  dated December  22, 1972- ’Tow’ and  ’Staple fibre’-Distinction between-Running length fibre (tow)  cut into  short length  fibre  (staple  fibre)- Substance  obtained-Polyester   staple  fibre-Excise   duty- Liability   for-Taxable    event   under   excise   law   is ’manufacture’.      Word  &  Phrases:  ’Tow’-’Staple  fibre’-’Manufacture’- Meaning of.

HEADNOTE: %      The  Central  Excise  Officers  during  the  course  of investigations made  against M/s Swastik Investment Company, Bombay found  that some  of the consignments of the material described  in  documents  as  ’crimpled  uncut  waste’  were cleared from  M/s Swadeshi Polytex Limited, Ghaziabad during the period  from  January,  1974  to  December,  1977,  were purchased by  the respondents  and utilised  by them  in the manufacture of ’polyester staple fibre’.      The Collector  held that  the  ’crimpled  uncut  waste’ purchased by  the respondents  was in  fact ’polyester fibre tow’ and  that the respondents had carried on manufacture of ’polyester staple  fibre’ from tow and, as such, exigible to duty.      Aggrieved by  the  Collector’s  Order  the  respondents filed an  appeal before  the Central  Board  of  Excise  and Customs. This  appeal was  transferred to the Customs Excise and Gold  Control Appellate Tribunal in pursuance of s. 35-P of the Central Excises and Salt Act, 1944.      The Tribunal  on an examination of the material and the contentions came to the conclusion that what the respondents had purchased  was already  man-made-fibre  but  in  running length, and that what they did in relation to it, was to cut it  into   staple  length  after  some  manual  sorting  and straightening and held that such cutting involved no 1007 manufacture and hence no duty liability could be imposed.      In the  Appeal by  the revenue  to this  Court  on  the question: whether  there was  exigibility to taxation on the

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item manufactured by the respondent.      Dismissing the Appeal. ^      HELD: 1.  There is  a  distinction  between  ’tow’  and ’staple fibre’.  ’Tow’  ’is  fibre  in  running  length  and ’staple fibre’ is obtained by cutting it into required short length. [1009B]      2.  The   taxable  event   under  the   Excise  Law  is ’manufacture’. ’Manufacture’ means to bring into existence a new substance  and does  not mean  merely  to  produce  some change in a substance. [1009D]      3.  Etymologically   the  word  ’manufacture’  properly construed would  doubtless  cover  transformation,  but  the question is  whether the  transformation in the instant case brings about  fundamental change, a new substance is brought into  existence,   or  a   new  different   article   having distinctive name, character or use results from a particular process or a particular activity. [1009D-E]      In the  instant case,  it is not disputed that what the respondents did,  was to  cut the running length fibre (tow) into short  length  fibre  (staple  fibre).  It  indubitably brought a  change in  the substance  but did  not bring into existence a  new substance.  The character  and use  of  the substance (man-made  fibre) remained the same. By the change in the  length of  the fibre,  the substance  acquired a new name. But  since the  tariff  entry  recognised  the  single description ’man-made  fibre’ with  no further  sub-division based on  length of  fibre and  even  without  any  distinct enumeration of  the various  forms of  fibre by cutting long fibres into  short ones,  the respondents did not bring into existence any  new product  so as  to attract any levy under the same  tariff entry.  Even by  cutting,  the  respondents obtained man-made  fibre. Such  cutting, therefore, involved no manufacture  and, hence, no duty liability can be imposed upon them. [1009E-H]      Union of India v. Delhi Cloth & General Mills, [1963] 1 Suppl. SCR  586; Empire Industries Ltd. & Ors. etc. v. Union of India  & Ors.  etc., [1985] Suppl. 1 SCR page 292 and M/s Ujagar Prints  v. Union  of India,  [1986] Suppl.  SCC  652, referred to. 1008

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 2891 of 1984.      From the  Judgment  and  Order  dated  28.2.84  of  the Customs Excise  and Gold  Control  Appellate  Tribunal,  New Delhi in Order No. 118/84-D.      A.K. Ganguli,  P. Parmeswaran  and  K.  Swamy  for  the Appellant.      The Judgment of the Court was delivered by      SABYASACHI MUKHARJI,J. This is a statutory appeal under Section 35-L(b)  of the  Central Excise  & Salt  Act,  1944, hereinafter  called  the  ’Act’,  against  the  Order  dated February 22,  1944 passed  by the  Customs,  Excise  &  Gold (Control) Appellate Tribunal, hereinafter called the ’CEGAT’      In this  appeal we  are  concerned  with  the  question whether there  was  exigibility  to  taxation  on  the  item concerned under  the Act.  It appears that during the course of investigations  made against  Swastik Investment Company, Bombay, the  Central Excise  Officers found that some of the consignments of  the material  described in the documents as ’crimpled uncut  waste’  were  cleared  from  M/s.  Swadeshi

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Polytex Ltd.,  Ghaziabad, during  the period  from Jan’74 to Dec’77 and  were purchased  by the  respondents  herein  and utilised in  the manufacture  of polyester staple fibre. The Collector held  that the  so-called ’crimpled  uncut  waste’ purchased by  the respondents  was, in fact, polyester fibre tow  and  the  staple  fibre  which  were  commercially  two distinct  products   and  the  respondents  had  carried  on manufacture of polyester staple fibre from tow and, as such, exigible to duty. The respondents filed an appeal before the Central Board  of Excise  & Customs  against the Collector’s Order. The  appeal was  thereafter transferred  to CEGAT  in pursuance of Section 35-P of the Act.      It appears  that there is distinction between a tow and staple fibre.  The Ministry of Finance (Deptt. of Revenue)’s circular indicates as follows:           "Tow is  a collection  of many parallel continuous filaments without  twist which  are grouped together in rope like form."           "Tow is used for the same purpose for which staple fibre is 1009 used. Tow  is mainly  converted into staple fibre and only a negligible quantity  is converted directly into yarn. It has been therefore  decided that duty should be levied on Tow at the rate  applicable to  staple fibre  (MF (DR  & I)  F. No. 50/7/71-CX 2 dt. 22.12.72)".      In other  words, Tow  is fibre  in running  length  and staple fibre  is obtained  by cutting it into required short length.  On   an  examination   of  the   material  and  the contention, the  Tribunal came  to the  conclusion that  the material which  the respondents  had purchased  was  already man-made  fibre   but  in   running  length.  All  that  the respondents did in relation to it, was to cut it into staple length after  some manual  sorting  and  straightening.  The question, therefore,  is whether cutting the long fibre into short fibre  resulted into  a new  and different articles of commerce. Now  it is  well settled  how to determine whether there was manufacture or not. This Court held in the case of Union of  India v.  Delhi Cloth  & General  Mills, [1963]  1 Suppl  SCR  586  that  ’manufacture’  means  to  bring  into existence a  new substance  and  does  not  mean  merely  to produce some  change in  a substance (emphasis supplied). It is  true   that  etymological  word  ’manufacture’  properly construed would  doubtless cover  the transformation but the question  is   whether  that   transformation  brings  about fundamental  change,   a  new   substance  is  brought  into existence or  a new  different  article  having  distinctive name, character  or use results from a particular process or a particular  activity. The  taxable event  under the Excise Law  is   ’manufacture’.  See   in  this  connection  Empire Industries Ltd.  & Ors.  etc. v. Union of India & Ors. etc., [1985] Suppl.  1 SCR page 292 and M/s Ujagar Prints v. Union of India,  [1986] Suppl.  SCC 652. In the instant case it is not disputed  that what  the appellant  did, was  to cut the running length  fibre (tow)  into short length fibre (staple fibre). It indubitably brought a change in the substance but did not  bring into existence a new substance. The character and use of the substance (man-made fibre) remained the same. It is true that by the change in the length of the fibre, it acquired a new name. But since in this case the tariff entry recognised the  single description  ’man-made fibre’ with no further sub-division  based on  length of the fibre and even without any  distinct enumeration  of the  various forms  of fibre  by   cutting  long   fibres  into   short  ones,  the respondents did  not bring into existence any new product so

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as to  attract any levy under the same tariff entry. Even by cutting,  the  respondents  obtained  man-made  fibre.  Such cutting, therefore,  involved no  manufacture and, hence, no duty liability can be imposed upon them. 1010      In that  view of  the matter  and on the facts found by the Tribunal,  we are  of the  opinion that the Tribunal was right in  the view  it  took  and  that  decision  needs  no interference. This  appeal, therefore, cannot be entertained and is accordingly dismissed. N.V.K.                                     Appeal dismissed. 1011