Custom, Excise & Service Tax Tribunal
Sudarshan R Kedia vs Pune Ii on 2 November, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NOS: E/3229, 3230 & 3232/2005
[Arising out of Order-in-Original No: 04 & 05/COMMR//05-06 dated 30/05/2005 passed by the Commissioner of Central Excise (Appeals), Pune II.]
For approval and signature:
Honble Shri Ramesh Nair, Member (Judicial)
Honble Shri C J Mathew, Member (Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
No
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
Aapul Textile & Industries Pvt Ltd
Sudarshan R Kedia
Appellants
versus
Commissioner of Central Excise
Pune II
Respondent
Appearance:
Shri J.C. Patel, with Shri D.H. Nadkarni, Advocates for the appellant Shri Ajay Kumar, Jt. Commissioner (AR) for the respondent CORAM:
Honble Shri Ramesh Nair, Member (Judicial) Honble Shri C J Mathew, Member (Technical) Date of hearing: 02/11/2016 Date of decision: 19/12/2016 ORDER NO: ____________________________ Per: Ramesh Nair:
The appellants are engaged in the garnetting of synthetic filament/fibre waste. Excise duty demand was confirmed on the ground that garneting process of waste amounts to manufacture in accordance with Chapter Note 3 of Chapter 55 of Central Excise Tariff Act, 1985. It is the contention of Revenue that synthetic staple fibres or filament yarns carded or combed or otherwise processed for spinning are included as staple fibres inviting classification under Chapter sub-heading No. 55.06. Garnetting and carding process are carried out on such synthetic waste and involve clearing, stretching and cutting of fibre in a determined length so that these process make finished goods capable of being spun into yarn. Against the confirmation of demand in the order-in-original the appellant filed these appeals.
2. Shri J.C.Patel, Learned Counsel for the appellant along with Shri D.H. Nadkarni, Advocate appearing on behalf of the appellant submits that the appellant is engaged in the process of garneting of the synthetic waste. He submits that with regard to their classification declaration filed under Rule 173B the jurisdictional Range Superintendent vide its letter dated 02/12/1999 clarified that garneting/carding does not amount to manufacture as per CBEC Circular No. 91/2/95-CX dated 13/01/1995. He further submits that the department again in 1996 vide their letter dated 07/10/1996 informed that in terms of Chapter Note 3 to Chapter 55 of Central Excise Tariff Act, 1985 garnetted fibre waste remains as waste under Chapter Heading 55.05 and, therefore, does not amount to manufacture and hence Central Excise registration is not required of this purpose. He also refers to the letter dated 25/01/1995 issued by the Assistant Collector of Central Excise, Pune I Division wherein, though the goods were seized under panchanama dated 15/09/1994 but the same was vacated and the goods along with documents were returned. He submits that with this action of the department it was accepted by the department that garneting and carding process does not amount to manufacture. He further submits that as per Chapter Note 3 to Chapter 55 which was relied upon in the show cause notice, it only indicates regarding the classification of the goods in question whereas in the Chapter Note there is no declaration that the process such as garneting/carding amounts to manufacture. Therefore, on the basis of Chapter Note 3 of Chapter 55 it is not correct to say that the process of garneting/carding amounts to manufacture. He submits that in the decision of this Tribunal in the case of Collector of Central Excise v. Amritsar Swadeshi Woollen Mills1989 (42) ELT 734 (Tribunal) it was held that garneting is not a manufacturing process and is basically a spinning process as the process does not involve the emergence of a different commercial commodity with characteristics different from the raw material. He also relied upon the following judgments:
i. Techno Associates Industries Pvt Ltd v. Commissioner of Central Excise, Indore 1998 (99) ELT 389 (Tribunal);
ii. Bombay Fibre Industries Ltd v. Collector of Central Excise 1996 (83) ELT (SC) iii. Gulf Oil Corporation Ltd v. Commissioner of Central Excise 2005 (183) ELT 40 iv. Shyam Oil Cake Ltd v. Commissioner of Central Excise 2004 (174) ELT 145 (SC) v. Anil Chemicals & Industries Ltd v. Commissioner of Central Excise 2006 (198) ELT 424
3. He further submits that the applicant on making an application under RTI received reply from the department that no unit engaged in the process of garneting and carding of waste of synthetic staple fibres of filaments and waste of artificial fibres and filaments falling under the Central Excise Tariff Heading 55.05 is registered under the jurisdiction of this office. This also shows that even the department also not pursuing the demand of duty on similarly placed manufacturers who are engaged in garneting/carding of waste. It is his submission that both the show cause notices involved in the present appeals have been issued beyond the normal period by invoking the proviso to Section 11A. However, from the facts it is clear that even the department was very much aware of the activity of garneting and carding of the appellants. There were chain of correspondence about the registration and dutiability of the said product. Therefore, even the department was of the view that after insertion of Chapter Note 3 under Chapter 55, the process amount to manufacture, then the department could have initiated the action well within the stipulated time period. Therefore, the extended period of time cannot be invoked as there is no suppression of fact on the part of the appellant. In this regard he place reliance on the judgments of Nizam Sugar Factory v. Collector of Central Excise, A.P. 2006 (197) ELT 465 (SC).
4. He further submits that on identical issue, the very same Commissioner, while deciding the appeal in the case of M/s Blumount Fibres Pvt Ltd, Badlapur has dropped the demand. However, in the present case, in the impugned order, the Commissioner, even after considering the said fact of Bluemount Fibres Pvt Ltd distinguished the same on the basis, that order was passed mainly on the Boards Circular 91/2/95-CX dated 13/01/1995 and Supreme Courts decision based on that circular whereas in the present case the matter has to be examined in the light of amendment to Central Excise Tariff Act, 1985. This clearly shows that without any proper basis the learned Commissioner has taken a contrary stand of his own finding given in the appellate order in the case of Bluemount Fibres Pvt Ltd.
5. On the other hand Shri Ajay Kumar, learned Jt. Commissioner (AR) appearing on behalf of Revenue reiterates the findings of the impugned order. He further submits that as per Note 3 to Chapter 55, garneting amounts to manufacture and as per this Tribunals decision in the case of Geetanjali Woolens Pvt Ltd v. Commissioner of Customs & Central Excise, Vadodara II 2007 (218) ELT 152 (Tri.-Ahmd.). He further submits that the manufacturing process of carding and garneting of the waste was not informed to the department by the appellant and thus this fact was suppressed by the appellant from the department. Therefore, the extended period of limitation was correctly invoked for confirming the demand.
6. We have carefully considered the submissions made by both the sides. We find that as regards the processing of carding and garneting of textile waste, this Tribunal in the case of Collector of Central Excise v. Amritsar Swadeshi Woollen Mills (supra) has clearly held that the process does not amount to manufacture. The relevant portion of the order is reproduced below:
8. We have carefully considered the submissions made by the learned SDR and the technical literature placed before us. The process in respect of which duty is demanded is garnetting which is defined in Indian Standard Glossary of Textile Terms Natural fibres - 232 -1967 as follows:-
The process of recovering fibres from hard twisted thread waste, rags, clip pings, etc. especially of wool. The object is to thoroughly break up the material and return it to a fluffy fibrous condition so that it may be re-used in blends or in some cases alone. It is clear from this definition that this process does not involve the emergence of a different commercial commodity with characteristics different from the raw material. The process results only in a re-arrangement of the entangled or twisted mass making it capable of being spun.
9. The process of garnetting is not a manufacturing process. It is a process incidental to spinning of yarn and is basically a part of the spinning process in which the thread waste is processed for opening of fibres to facilitate the spinning process as the tangled mass of threads are likely to damage the carding machine. Therefore, the goods i.e. waste after garnetting are not excisable.
7. From the above decision it was clearly held that the goods i.e. waste after garneting is not excisable as it does not involve emergence of different commercial commodity with characteristics different from the raw material. Despite the above judgment, Revenue has heavily relied upon the Chapter Note 3 which was inserted in Chapter 55 of Central Excise Tariff Act, 1985 which is reproduced below:
3. In relation to the products of headings 5506, 5507, 5508, 5509, 5510, 5511, 5512, 5513, 5514, 5515 and 5516 and the entries relating thereto, the expression "staple fibres" shall include waste of synthetic staple fibres or filaments and waste of artificial staple fibres or filaments after they have been carded, combed or otherwise processed for spinning.
8. From a plain reading of the above referred Chapter Note it can be seen that the Chapter Note is for the purpose of classification of the waste of synthetic staple fibres but it does not declare that the process of garneting/carding amount to manufacture, unlike certain process given in Chapter Note 4, which is reproduced below:
4. In relation to goods falling under heading 5512 or 5513 or 5514 or 5515, bleaching, dyeing, printing, shrink-proofing, tentering, heat-setting, crease-resistant processing, any other like processing and any combination of such processes shall amount to 'manufacture'.
9. From the comparison of both the Chapter Note 3 and 4 it is found that wherever the legislature have intention to create deeming provision about manufacture in respect of certain process, the Chapter Note such as Note 4 is created. Whereas, in Chapter Note 3 it does not provide to create a deeming provision to treat the process as manufacture. Therefore, merely because Chapter Note 3 mentions about the garneted/carded/ combed or otherwise processed waste that does not mean that the process of garneting/carding will fall under the activity of manufacture
10. We have gone through the various judgments cited by the Learned Counsel. In the case of Techno Associates Industries Ltd v. Collector of Central Excise (supra) this Tribunal has clearly held that garneting is not a process of manufacture. Similarly, in the case of Bombay Fibre Industries Ltd. (supra) the Honble Supreme Court, taking note of Boards Circular No. 40/2/95-CS dated 13/01/1995 held that the process of garneting and/or carding of duty paid waste of filaments/waste of staple fibres falling under Chapter 54 and 55 of the Schedule to the Central Excise Tariff Act, 1985 do not amount to manufacture within the meaning of Section 2(f) of the Central Excise and Salt Act, 1944. In the case of Gem Spinners (India) Ltd (supra) this Tribunal held that the process of combing of natural fibre as well as waste material, process being merely physical process of segregation and separation of usable materials/fibres from non-usable short of fibres and dirt material does not amount to manufacture. In a similar case of C.T. Cotton yarn Ltd (supra) this Tribunal after remand by the Supreme Court, conclusively held that carding and combing of ginned cotton does not amount to manufacture. Regarding the issue whether the Chapter Note 3 given in Chapter 55 can be sufficient to hold that process of garneting/carding amounts to manufacture, we have gone through the judgment in the case of Gulf Oil Corporation Ltd (supra) wherein it was observed as under:
5.?We have considered the submissions of both the sides. Notification No. 63/95-C.E. dated 16-3-1995 exempts all goods, if manufactured in the workshop, situated within the precincts of mines and intended for use in such mines. It has not been disputed by the Revenue that the Appellants are sending ammonium nitrate, diesel oil and emulsion matrix separately to the mine in their mobile van specifically designed for preparation of bulk explosives. The mobile van carries all ingredients to the mine site and at the mine site these ingredients are mixed in the forth compartment of the mobile van to become bulk explosive which is immediately delivered to the bore hole. We find substance in the submissions of the Appellants that only after mixing of the ingredients the bulk explosive comes into existence. The process of manufacture takes place only at mines and not in the factory. Note 2 to Section VI is in respect of classification of the products which are put up in sets consisting of two or more separate constituents and are intended to be mixed together to obtain a product of Section VI or Section VII. The said Note provides that the product is to be classified in the Heading appropriate to the product subject to the condition specified in the Note. In our view Note 2 has no application in the present matter as the process of manufacture of explosives is carried out not in the factory but at the site which is in the mines. Note 2 to Section VI does not provide that the process of carrying the materials separately will amount to manufacture in the factory itself. It has been held by the Supreme Court recently in the case of Shyam Oil Cake v. CCE, Jaipur - 2004 (174) E.L.T. 145 (S.C.) that merely setting out a process in the Tariff Entry would not be sufficient. If the process is indicated in the Tariff Entry, without specifying that the same amounts to manufacture, then the indication of the process is merely for the purpose of identifying the product and the rate which is applicable to the product. In other words, for a deeming provision to come to play it must be specifically stated that a particular process amounts to manufacture. In the absence of it being so specified commodity would not become excisable merely because a separate Tariff Item exists in respect of that commodity. Note 2 to Section VI does not indicate putting of goods in sets consisting of two or more separate constituents would amount to manufacture. As actual manufacture has not taken place in the factory the benefit of Notification No. 63/95 cannot be denied merely because the goods were transported in a mobile van to the site and mixed together to get explosive in the mines. We, therefore, set aside the impugned Order and allow the appeal filed by the Appellants.
11. In the case of Shyam Oil Cake Ltd (supra) the Honble Supreme Court has observed that 23.?It was submitted that the decision in Aman Marble Industries case is not laying down the correct law inasmuch as it has not taken note of the amended definition of the term manufacture in Section 2(f). It was submitted that for a process to amount to manufacture it need not be so mentioned only in the Section or Chapter Note and that it could also be so mentioned in the Tariff Item. It is true that the amended definition has not been taken note of. We are in agreement with the submission that under the amended definition, which is an inclusive definition, it is not necessary that only in the Section or Chapter Note it must be specified that a particular process amounts to manufacture. It may be open to so specify even in the Tariff Item. However, either in the Section or Chapter Note or in the Tariff Entry it must be specified that the process amounts to manufacture. Merely setting out a process in the Tariff Entry would not be sufficient. If the process is indicated in the Tariff Entry, without specifying that the same amounts to manufacture, then the indication of the process is merely for the purposes of identifying the product and the rate which is applicable to that product. In other words, for a deeming provision to come into play it must be specifically stated that a particular process amounts to manufacture. In the absence of it being so specified the commodity would not become excisable merely because a separate Tariff Item exists in respect of that commodity.In view of the above judgment it is very clear that in the present case though in Chapter Note 3 the same process was referred but does not mention that a particular process such as garneting/carding amounts to manufacture. In the absence of such mention by applying Chapter Note 3 the process cannot be held to be manufacture of excisable goods.
12. As per our above discussion we find that prior to insertion of Chapter Note 3 it was clearly held in Amritsar Swadeshi Woollen Mills (supra) that garneting is not amounting to manufacture. Subsequently, even after insertion of Chapter Note 3 which does not provide the process of garneting/carding amounts to manufacture the process remain as non-manufacturing activity. We are, therefore, of the considered view that the process of garneting/carding of textile waste does not amount to manufacture and hence not liable to duty. Since we are deciding the matter on merits, we do not feel it necessary to go into the other aspects such as limitation, etc.
13. The impugned orders are set aside and appeals are allowed.
(Pronounced in Court on 19/12/2016) (C J Mathew) Member (Technical) (Ramesh Nair) Member (Judicial) */as 13 2