Customs, Excise and Gold Tribunal - Mumbai
Century Textiles & Industries Ltd. And ... vs Commissioner Of Central Excise, Mumbai ... on 26 February, 2001
ORDER
Gowri Shankar, Member (Technical)
1. We are concerned in each of these appeals with the inclusion in the assessable value of the yarn manufactured by each of the appellants of the cost of sizing that yarn. Appeals 4009 to 4014 are by Century Textiles & Industries Ltd and others by Shyamprakash Spinning Mills Ltd.
2. Century Textiles spins cotton yarn. It has filed appeals against the orders of the Commissioner (Appeals) confirming the orders of the Assistant Commissioner that in computing the value of yarn captively consumed in weaving fabrics, it is the value of the sized yarn that has to be considered, and not the value of the yarn before sizing. The clearances took place between May 1995 and February 1996.
3. It is necessary to consider the history of judicial decisions relating to this aspect. The first of the decisions that we are concerned with is that of the Delhi High Court in JK Spinning & Weaving Mills 1983 (12) ELT 239. One of the points before the Delhi High Court was whether levy of duty could be on sized yarn or unsized yarn in a composite mill having a continuous, integrated process of manufacture. The Court noted that the product obtained by spinning is unsized yarn, and said that merely because the yarn is later subjected to sizing, its nature is not changed. "Sizing is only a process in manufacturing fabrics and does not amount to manufacturing new goods. Sized yarn is not new goods which comes into existence... Sizing is relevant in weaving and not in spinning. It is a process necessary for weaving cloth and not to spinning yarn." Therefore, it concluded what would be deemed to be removed under Rule 49 for weaving would be unsized yarn and not sized yarn. The duty therefore has to be levied on the unsized yarn ignoring the weight of sizing added to the yarn sized. The duty at the relevant time was based on the weight of the yarn.
4. During the period with which we are concerned, Note 1 to Chapter 52 of the Tariff, which specified a number of processes in relation to yarn to be manufactured, did not include the process of sizing. Sizing had earlier been specified as a process but was removed from the note from 16.3.1995. During the period in question, therefore, there was no provision to hold sizing to be manufacture. That being the case, the ratio of the Delhi High Court's decision, which has been affirmed by the Supreme Court on appeal (as reported in 1987 (32) ELT 232) will apply. It would follow that sizing was not any" other process" referred in that note.
5. The reasons that the Commissioner (Appeals) advances is that sizing would be included in "any other process" mentioned in note 2 to Chapter 52, after specifying various processes. The Tribunal has considered this aspect in Bombay Dyeing and Manufacturing vs CCE 2000 (120) ELT 182, and it noted that the Board itself, in its order passed under Section 37B dated 27.3.1999 (reproduced in 1999 (114) ELT T-50) had held that duty on yarn, which is sized before it is taken up for weaving in a composite mill will be leviable before sizing. It had noted that while the order itself would take effect only prospectively from its issue, the reasoning given in that order would apply to a situation in which the note to Chapter 52 was identically worded.
6. The Board's order is substantially based upon the judgement of the Delhi High Court and the Supreme Court that we have referred to. It has relied upon "identical inclusive definition of manufacture in regard to cotton yarn as incorporated in the erstwhile clause (iv) to Section 2 (f) in present note 1 to Chapter 52 under the old and new tariff respectively. In other words, the decision regarding collection of duty on unsized yarn in a composite mill would squarely apply to past 1986 period too." The Board's order also noted the absence of the specific mention in Note 1 to Chapter 52 as a result of the 1985 budget. In the light of this, and the fact that the view of the authority administering the law should be given due consideration in interpreting the scope and meaning of the law, we are therefore of the view that duty should be demanded not on the unsized yarn but on the sized yarn.
7. Shyamprakash Spinning Mills Ltd manufactures synthetic yarn classifiable under heading 5504 and 5506. The period with which we are concerned is between April and October 1994. Duty has been demanded on the yarn cleared during this period for home consumption on the basis of the price at which it was sold. The show cause notices allege that in determining the value the appellant did not include the cost of sizing of yarn.
8. The contention of the representative of the appellant is that if it held that it is the unsized yarn that is liable to duty for captive consumption, it would follow that it is the same yarn which is liable to duty for home consumption. We have no quarrel with this proposition. In fact, the Bombay High Court in its judgement in Union of India Vs Swan Mills Ltd 1991 (56) ELT 44 had considered the judgement of the Delhi High Court in JK Cotton and Spinning Mills vs Union of India and took the view that the sentence in paragraph 30 of the order that if sized yarn is cleared for home consumption, it would attract duty would be in the nature of obiter dicta not relevent in deciding the issue, and held that duty was leviable on the weight of the unsized yarn, and not on the sized yarn.
9. This does not help the appellant's case. During the relevant period, the duty on the yarn is ad valorem. It is not disputed that the price list filed by the manufacturer was for goods to be sold in the course of wholesale trade. Nor is it disputed that the price charged to the buyers included the cost involved in sizing and that there was a single invoice for sized yarn. That being the case, whether the process of sizing does or does not amount to manufacture is entirely irrelevant. That would in no case affect the sale price, which is the basis for the assessable value. It is possible, indeed likely, that if a manufacturer did not sell the yarn but cleared it, say, to a job worker and the assessable value was based not on the sale price but on the cost of manufacture, the judgement of the Courts holding that sizing does not amount to manufacture would apply. But it is not necessary for us to express a firm opinion on this because that is not what we are concerned with.
10. Mr. Mondal's cites the decision of the Tribunal in CCE vs. Dawn Mills Co Ltd 1998 (98) ELT 448. In this decision, the Tribunal had affirmed the view of the Collector (Appeals) that in determining duty on yarn it is the weight of the unsized yarn that has to be taken into account. The ratio of that decision will not apply to the facts of this case. Where the duty is specific, and on the weight of the goods, considerations as to whether the increase in the weight of the goods was by a process not amount to manufacture could be of significance. Here, however, the basis of assessment is not the weight of the yarn but the value i.e. the price at which the goods were sold. This is the basis for assessment under Section 4 of the Act. In making that assessment, the fact that one or more process involved did not amount to manufacture would not be of any significance. What the assessing officer should consider is the sale price of the final product. The reliance by the department on the Supreme Court's decision in Sidhartha Tubes Ltd vs CCE 2000 (115) ELT 32 in which the Court upheld the view of the Tribunal that, notwithstanding the fact that galvanising not a process of manufacture, the cost of galvanising done by a manufacturer upon goods after he manufactured and cleared them on payment of duty would form part of the assessable value is apposite.
11. Appeals 4009 to 4014/96 allowed. Consequential relief, if permitted by law. Appeals 259/96 and 1076/96 dismissed.