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High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE T. SATHIADEV
Madura Coats Limited - Appellant
Versus
Superintendent of Central Excise and Two Others - Respondent
Case No : W.P. No. 3813 of 1978
Decided On : 30 June 1981
CENTRAL EXCISES AND SALT ACT, 1944 - NOTIFICATION NO. 119/75-C.E. - JOB WORK - EXEMPTION - INTERPRETATION - SINGLE OR MULTIPLE ARTICLES - TWISTING OF YARNS - WHETHER NEW PRODUCT CREATED.
Fact of the Case:
Petitioner, a job worker, challenged the demand of duty under Tariff Item No. 68 of the Central Excises and Salt Act, 1944, on the ground that the work done by it was exempt under Notification No. 119/75-C.E. The petitioner received three types of yarn from the third respondent and twisted them together to create a single yarn. The petitioner claimed that this process was job work and that it was entitled to the exemption under the notification.
Finding of the Court:
The court held that the petitioner was entitled to the exemption under the notification. The court found that the petitioner had not added any material of its own to the yarns and that the yarns had not lost their identity after the twisting process. The court also found that the petitioner had charged only for the conversion process and not for any new product.
Issues: Whether the petitioner's work was job work within the meaning of Notification No. 119/75-C.E.
Ratio Decidendi: The court interpreted the term 'job work' in the notification broadly to include cases where more than one article is supplied by the supplier. The court held that the petitioner's work was job work because it had not added any material of its own to the yarns and the yarns had not lost their identity after the twisting process.
Final Decision: The court issued a writ of mandamus directing the first respondent to grant the necessary exemption to the petitioner.
This petition is filed for issue ofwrit of mandamusto direct the first respondent to grant the necessary exemption under Notification No. 119/75-C.E., dated 30-4-1975 (hereinafter called the notification) in respect of the fob work done by it for the third respondent.
2.In the affidavit, it is stated that in respect of Tariff Item No. 68 of the Central Excises and Salt Act, 1944 while levying duty, certain exemptions are provided by the notification above referred to and as per notification only job work had been done by the petitioner and no new product having been manufactured by it, quite different from what had been supplied by third respondent, the petitioner is not liable to pay duty under Tariff Item No. 68 as claimed by respondents 1 and 2. First respondent by trade Notice No. 273/77, dated 30-11-1977 claimed that "Fenaplast yarn" produced by twisting different types of duty paid filament and spun yarn material, is assessable to duty under Tariff Item No. 68 of the Act and that the exemption claimed would not be available. By further letter dated 17-3-1978 first respondent again reiterated that as the nylon yarn itself is not returned to the customer but it is twisted with duty paid cotton yarn belonging to the petitioner, and the resultant product returned to the buyer being a new product, the manufacture cannot be considered as a job work within the scope of the explanation to Notification No. 119/75-C.E., dated 30-4-1975, and hence exemption cannot be granted.
3.On 7-4-1978, the first respondent was informed by the third respondent stating that duty paid cotton yarn which is combined with nylon yarn does not belong to the petitioner herein, but only processed by them. Inspite of such clarifications, since duty was demanded as payable under Tariff Item No. 68, the present petition had come to be filed.
4.The petitioner claims as follows: Fenner imports 12' Lea spun nylon yarn and 840 Danier filament nylon yarn from abroad under actual user's licence granted to it and purchases locally 6s cotton yarn. Fenner supplies to the petitioner these three types of yarn namely :-
(1) 840 Denier filament nylon yarn,
(2) 12s Lea spun nylon yarn, and
(3) 6s cotton yarn.
For the specific purpose of performing a particular job work, namely, combining the three yarns together so as to make the three types of yarn into a single yarn, namely 6/2/4 yarn. The three types of materials which Fenner supplies are the absolute property of Fenner the third respondent. For the conversion effected Rs. 7 .02 per kilogram is charged and third respondent also required combining of 840 denier filament nylon yarn into 6 plies of the same type of filament yarn and this job is also carried out by petitioner for which the petitioner charges a sum of Rs. 9/- per kilogram.
5.The main contention of the petitioner is that the three types of materials above referred to are combined together by being twisted, and what transpires is only a change in the physical form and the three materials are still identifiable. Whatever materials that had been given, by the third respondent, are returnedin toto, without the petitioner supplying any material to form part of what is returned. Therefore, the petitioner comes within the scope of the exemption covered by the notification.
6.Mr. V.K. Thiruvenkatachariar, learned Counsel for the petitioner, to further substantiate this contention, relies upon the decision reported inMadura Coats Limitedv.Collector of Central Excise, West Bengal 1980 ELT 582 (Cal.) wherein pertaining to the same notification relief was granted to the petitioner-company in respect of the job work undertaken by it to arrange nylon or rayon yarn supplied by the customers to it to be loosely held together parallely by cotton yarn supplied by the petitioner. Such arrangement of rayon or nylon is called tyre cord warp sheets. In that process, the petitioner-company had to supply certain incidental materials. Even then it was held that it would not dep
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