IMPORTANT POINT
Stitching and making of eyelets in tarpaulin sheets does not bring into existence a new and distinct product with total transformation in the original commodity. Hence it is not manufacture.

Headnote:(a) Central Excise Tariff Act, 1985 – Section 2(f) – Manufacture – Manufacture means production of an article for use from raw or prepared materials, by giving these materials new form, quality, properties or combinations whether by hand labour or machinery – The word includes any process incidental or ancillary to the process of manufactured product – Manufacture implies a change, but every change is not a manufacture, something more is necessary – There must be transformation, a new and different article must emerge, having a distinctive name character or use. (Para 13)
        (1961) 2 SCR 14; (1997) 5 SCC 767; (1968) 3 SCR 21 – Relied upon
        (b) Central Excise Tariff Act, 1985 – Section 2(f) – Manufacture – It is only when the change or a series of changes takes the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place. (Para 15)
        2008 (233) ELT 8(SC); 1977 (1) ELT (J199); 1989 (40) ELT 280(SC); (1988) Supp. SCC 239; (1986) 162 ITR 846(SC); 46 CLR 572 – Relied upon
        TRC No. 215/90; 2004 (174) ELT 7 (S.C.) – Referred
        (c) Central Excise Tariff Act, 1985 – Section 2(f) – Manufacture – A question as to when a manufacture of product takes place within the meaning of Section 2(f) of the Act is mixed question of law and fact. (Para 18)
        2002 (143) ELT 3(SC) – Relied upon
        (d) Central Excise Tariff Act, 1985 – Section 2(f) – Manufacture – Slitting/cutting of jumbo rolls of toilet tissue paper/aluminium foil into smaller size does not amount to manufacture (Para 21)
        2005 (186) E.L.T.385(S.C.) – Relied upon
        (e) Central Excise Tariff Act, 1985 – Chapter 63 – Marketability is an essential ingredient in order to be dutiable under Schedule to Central Excise Tariff Act, 1985. (Para 22)
        1989 (40) ELT 280(SC); 1995 (76) ELT 241; 1997 (91) ELT 253 – Relied upon
       Facts of the case:
        1. These appeals raise a common issue, viz., whether the tarpaulin made-ups which are prepared after cutting and stitching the tarpaulin fabric and fixing the eye-lets would involve the process of manufacture and, hence, would fall within the definition of ‘manufacture’?
       Finding of the Court:
        There is n infirmity in the impugned judgment.
       Result : Appeals dismissed.

JUDGMENT

H.L. Dattu, J. —

ISSUE:

These appeals, which are at the instance of the Commissioner of Central Excise, raise a common issue, viz., whether the tarpaulin made-ups which are prepared after cutting and stitching the tarpaulin fabric and fixing the eye-lets would involve the process of manufacture and, hence, would fall within the definition of ‘manufacture’ ?

FACTS:

2) The issue above mentioned has come up in the light of the following facts which can be briefly stated as follows: we take M/s Tarpaulin International Civil Appeal No. 5341 of 2005 as the lead case. The noticee is carrying on the business of producing and selling ‘tarpaulin made-ups’. The ‘tarpaulin made-ups’ are nothing but the tarpaulin cloth which is prepared by making solution of wax, aluminum stearate and pigments which are mixed and the solution is heated in a vessel and transferred to a tank. Grey cotton canvas fabric is then dipped into this solution and passed through two rollers, where after the canvas is dried by exposure to atmosphere. Thereafter, the tarpaulin made-ups are prepared by cutting the cloth into various sizes and stitched and eye- lets are fitted. The noticee states that the process of mere cutting, stitching and putting eyelets does not amount to manufacture and hence, the department cannot levy Excise Duty on tarpaulin made-ups. However, the view of the department is that, the “made-ups” prepared by means of cutting, stitching and fixing of eye-lets amounts to manufacture and, hence, they are exigible to duty under the Central Excise Tariff Act, 1985 (for short ‘the Act’).

3) A show cause notice was issued by a competent authority dated 31.8.1995, inter alia directing the noticee to show cause as to why tarpaulin made-ups be not classified under chapter sub-heading 63.01 and the corresponding duty of Rs.57,33,262/- be demanded. The assessees had filed their replies inter alia contending that no manufacturing process was involved in the conversion tarpaulin fabric into tarpaulin made-ups.

COMMISSIONER OF CENTRAL EXCISE:

4) After adjudication, the matter was decided by the Commissioner of Central Excise, vide Order no. 10/1997. Being aggrieved, the assessee went up in appeal before Customs, Excise and Gold (Control) Appellate Tribunal, South Zonal Bench at Chennai. The Tribunal vide its order dated 24.04.1998 remitted the matter to the Commissioner of Central Excise for de novo adjudication after due consideration of all material evidence. The Commissioner, vide order in Original no. 24/2000 dated 28.11.2000 decided the issue in favour of the Department. The Commissioner concluded by holding that the tarpaulin made-ups were specifically covered under Tariff heading 63.01. The Commissioner in terms of Rule 3(a) of the Interpretative Rules, stated that the heading which provides more specific description is to be preferred to the heading that provides a general description.

CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL:

5) Aggrieved by the Commissioner’s order dated 28.11.2000, the noticee/assessee filed appeal before the Tribunal. It was contended on behalf of the assessee that conversion of Tarpaulin fabric into “Tarpaulin made ups” does not amount to manufacture for the purpose of levy of central excise duty. However, Revenue contended that tarpaulin made- ups are a distinct marketable commodity known to Trade and therefore, it should be held to be excisable. It was also contended that, on account of the specific coverage of the item in the Central Excise Tariff, it would be exigible to duty.

6) The Tribunal after giving due consideration to the submission of both sides, has come to the conclusion that no ‘manufacture’ was involved in the conversion of Tarpaulin made-ups. While so deciding, the Tribunal has relied on the decision of Andhra Pradesh High Court in,1 TRC No. 215/90 [State of Andhra Pradesh v. Binny Ltd.], wherein it is held, that, stitching of the edges of cotton canvas and fitment of eyelets thereto did not bring a

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2010 Supreme(SC) 679

IMPORTANT POINT Stitching and making of eyelets in tarpaulin sheets does not bring into existence a new and distinct product with total transformation in the original commodity. Hence it is not manufacture.

Cases Referred (8)

IMPORTANT POINT
Stitching and making of eyelets in tarpaulin sheets does not bring into existence a new and distinct product with total transformation in the original commodity. Hence it is not manufacture.