ORDER
12-5-1988
Prakash Anand, Member
1. In this case appellants manufacture viscose staple fibre yarn of 15-80 counts, and pay duty on it under tariff item 18-III(i). Thereafter the two yarns are twisted together to make multiple fold yarn. Appellants submit that in the process of twisting together, the staple fibre yarn does not lose its identity and the resultant product continues to be classifiable under tariff item 18 III(i). It is pointed out in this connection that as per the Explanation contained in item 18 III itself, multiple fold yarn is included under the tariff entry, and therefore no further duty would be payable on such yarn.
2. We have heard Shri Gopal Prasad, consultant for the appellants and Shri K.C. Sachar, JDR for the department.
3. Shri Gopal Prasad, at the very outset, has furnished a copy of the orders of this Bench No. 132/87-D dated 10-2-1987 in Appeal No. E-1654/81-D filed by the same appellants. It is submitted that this order fully covered the issue in favour of the appellants. The learned consultant reiterates the other arguments which were put forward before the lower authority.
4. Responding, Shri K.C. Sachar submits that Order No. 132/87-D on which appellants have relied, follows the ratio of the decision in the case of India Jute Company Ltd. v. Collector of Central Excise, Calcutta [1986] 10 ECC-T 297 : 1987 Vol. 10 ECR 323 and the view taken therein was erroneous. It is submitted that the basic fact is that a process of manufacture has taken place and this has resulted in production of a new product known to the market. As per the ratio of the Supreme Court decision in the case of Empire Industries Ltd. and Ors. v. Union of India and Tribunal decision in the Guardian Plasticote Ltd. case 1086 (24) ELT 542, this product, it is submitted, should, therefore be liable to duty afresh.
5. I have carefully considered the facts of the case and the submissions made before us. I have also seen the Tribunal’s Order No. 132/87-D dated 10-2-1987 in the case of The General Industrial Society Ltd. Hooghly (W.B.) v. Collector of Central Excise, Calcutta which has been cited by the appellants in their favour. I observe that in that case also the impugned product was Fancy Yarn produced by doubling of two stable fibre spun yarns of different counts. The Tribunal decided that the two constitutent yarns in that case both fell under tariff item 18-III, central excise tariff and that, as decided in the case of India Jute Company Ltd. v. Collector of Central Excise, Calcutta (supra), the resultant fancy yarn produced by twisting such strands of yarn would also fall under tariff item 18-III, CET and not under tariff item 68, CET. The Tribunal’s order also made a mention of an earlier decision in the case of Collector of Central Excise, Bhubaneshwar
v. Orissa Weaver’s Cooperative Spinning Mills, Tora, Baragarh. Thus it would appear that the issue in the present matter before us is fully covered by order No. 132/87-D dated 10-2-1987 which is cited by the appellants in their favour.
6. I have now to come to the submission from the department’s side that the view taken in Tribunal order No. 132/87-D dated 10-2-1987 is erroneous and contrary to the decision of the Supreme Court in the case of Empire Industries v. Union of India and the Tribunal decision in the case of Guardian Plasticote Ltd (supra). I observe that in the case of Guardian Plasticote Ltd. (supra) a five Member Bench of this Tribunal held that the moment there is a transformation bringing into existence a new product, commercially known as a distinct and separate commodity having its own character, use and name, whether it be the result of one process or several processes, “manufacture” takes place and liability to duty is attracted. It was held that this was the principle which emerged from the decision of the Supreme Court in the case Empire Industries v. Union of India. Accordingly, it was decided that when two layers of kraft paper were laminated with polythene, a new product emerged and that, although both kraft paper and laminated paper fell in the broad category of packing and wrapping paper, the process of lamination amounted to “manufacture”, attracting additional levy of duty. It was further clarified in the Guardian Plasticote case that a process could result in manufacture of a distinct excisable commodity under the same tariff item or under the same sub-heading of the tariff item and this would not affect its liability to duty again as a new excisable commodity.
7. Again, in the case of Srinivasa Metal Industries v. Collector of Central Excise, Guntur , it was held by this Tribunal, relying on the decision in the Guardian Plasticote case, that if the process of manufacture led to the emergence of a new and distinct commercial product, marketable as such, the new product would invite imposition of duty, even though the item may continue to fall under the same tariff item or even same sub-heading of the tariff item.
8. On the other hand, I find that in the case of the same appellants, this Tribunal, in their Order No. 132/87-D dated 10-2-1987, have held that, as decided in another case of India Jute Company Ltd. v. Collr. of Central Excise, Calcutta (supra), in a case where several strands of celluosic spun yarns falling under tariff item 18-III, CET are twisted to produce what is known as fancy yarn, the resultant fancy yarn would also fall under tariff item 18-III and not under tariff item 68, CET, and it would not be chargeable to any further duty.
9. I have seen the decision of this Tribunal in the India Jute Company Ltd. case. The Tribunal observed in that case :
We observe that by twisting of several strands of cellulosic spun yarn, the product still remains covered under tariff item 18 III of CET. The so called ‘fancy yarn’ produced by the appellants comes within the four corners of the description of cellulosic spun yarn as given in the said tariff item” It was held that that the department’s reliance on the Tribunal’s decision in the case of Aditya Mills Ltd. v. Collector of Central Excise, Jaipur 1983 ELT 1853 was misplaced inasmuch as the product involved in that case was yarn which was manufactured by doubling and twisting of two distinct types of yarn falling under two separate tariff items.
10. While I have gone through the various orders of the Tribunal cited before us, I observe that some confusion has crept in at later stages when it has been assumed perhaps that any view that is taken in respect of multifold cotton yarn would necessarily or automatically apply also to fancy yarn. The fact of the matter is that while all fancy yarn in such cases is multifold, all multifold yarn is not fancy yarn. The ratio of the Tribunal’s decision in the case of multifold cotton yarn does not necessarily become applicable in the case of fancy yarn. Thus, for instance, in the case of Collector of Central Excise, Bhubaneshwar v. Orissa Weaver’s Cooperative Spinning Mills, hank yarn manufactured was fully exempted from duty. The dispute was whether the assessee could be made liable to pay duty at the pre-hank or at the cone stage. The Collector of Central Excise (Appeals) accepted the assessee’s submissions that coning was an intermediary stage of production of cotton yarn in hanks and that since the cotton yarn remained cotton yarn even after reeling into hanks, there was no transformation of the cotton yarn into any different product. Therefore the provisions of Rules 9 and 49 of Central Excise Rules, 1944 were not applicable and there was no further liability to duty. The Department’s point was that the removal of cotton yarn on cones for conversion into double yarn banks amounts to removal for manufacture of another commodity and hence the assessee was required to pay the duty at the time of removal of cones. This view was rejected by the Tribunal and it was held that, as is made clear in explanation (2) below item 18A, central excise tariff bobbins, cones and hanks are all various “forms” of the same commodity, namely cotton yarn. Further, it was held, it was made clear in Explanation II below item 18 III, CET made applicable to item 18A by virtue of explanation (3) thereunder, that cotton yarn includes both single yarn as well as multiple fold yarn. In fact, it was held that single yarn or multiple fold yarn or doubled yarn are only two different varieties of cotton yarn. They are not different commodities either in the central excise tariff or commercially. The stages of bobbins, cones/cheeses, doubling bobbins and hanks were held to be stages in the manufacture of multiple fold yarn. Although, therefore, cotton yarn remained only cotton yarn at different stages of its conversion, till it reached the final form in hanks and there was no transformation from one commodity to another, it was added
we find no warrant for taxing cotton yarn repeatedly because of change in forms within the same factory and under the same tariff item 18A–‘Cotton yarn, all sorts’.
11. In the case of India Jute Company Ltd. the impugned product was not plain multiple fold yarn. The product was different from ordinary double fold staple fibre yarn and involved transformation into a separate category of products having a distinct name in the trade parlance and a separate character and use. It is, therefore, that it was claimed that it should be classifiable under tariff item 68. This submission made before the Special Bench escaped consideration and reliance was placed on the decision in the Collector of Central Excise, Bhubaneshwar v. Orissa Weaver’s Cooperative Spinning Mills where the impugned product and the facts in issue were quite different. I, therefore, feel that we cannot in this matter rely on the decision in the Indian Jute Company Ltd. case.
12. Nor, of course, can we rely on the decision of this Tribunal in the case of Aditya Mills Ltd. v. Collector of Central Excise, Jaipur (supra) in which the product was obtained as a result of doubling and twisting two distinct types of yarn falling under distinct tariff items, one being rayon filament yarn and the other being polyester spun yarn. So in that case the product had not been manufactured merely from doubling and twisting single strands of yarn falling under the same tariff item, as in the present matter before us.
13. The simple issue that is now before us, is as regards duty liability of fancy yarn which basically is in the nature of multiple fold yarn in the sense that it is produced by twisting together strands of yarns falling under the same tariff item, that is 18 III but specially manufactured in such a manner that such product is not made for ordinary use as multiple fold yarn, but is produced into something completely different from either the basic single product or ordinary multiple fold yarn inasmuch as fancy yarn has different commercial use and is known differently in the market. In fact this basic fact as regards distinct identity and commercial use of the product can hardly be disputed.
14. The position as it emerges from the above analysis is that the final product in this case, namely fancy yarn is basically nothing but multiple fold yarn. Therefore, in terms of the reasoning so ably discussed in the Orissa Weaver’s Cooperative Spinning Mills case, it is rightly classifiable only under the same tariff item as the basic single yarns which have gone into the production of the final product and not under tariff item 68.
15. However it does not follow from this that no further duty would be chargeable on such fancy yarn. Although such fancy yarn continues to fall under tariff entry 18 III(i), yet, in view of the emergence of a new product having a distinct market and use, admittedly, manufacture has taken place, attracting further duty under the central excise tariff, in terms of the ratio of the Supreme Court decision in the case of Empire Industries (supra) and the Tribunal decision in the case of Guardian Plasticote.
16. I would in this connection also refer to the judgment of this Tribunal in the case of Srinivasa Metal Industries, Rajahmundry v. Collector of Central Excise, Guntur where the implications of the Supreme Court decision in Empire Industries case and the Tribunal decision in the M/s. Guardian Plasticote Ltd. case have been fully discussed.
17. Accordingly, I set aside the classification of the impugned product under central excise tariff entry 68 and hold that the goods are classifiable under tariff item III(i).
18. I further hold that duty is payable again on the conversion of single yarn into fancy yarn under tariff item 18III (i). However this decision as regards further dutiability of the goods, as per classification hereby ordered, does not help sustain any demand of duty that might have been raised by the Department as per the decision of the lower authorities classifying the goods under tariff item 68. If any duty is demanded on this basis, this is also set aside.
Appeal allowed in these terms.
V.T. Raghavachari, Member
1. I have carefully perused the order prepared by Shri Anand. I agree with his conclusion that the product in issue is classifiable under item 18-III (i), CET. However, in paragraph 11 of his order Shri Anand has mentioned that in the decision of this Tribunal in the case of India jute Company Ltd. 1987 Vol. 10 ECR 323 . a submission made to the Bench had escaped consideration and reliance was placed on the earlier decision in the case of M/s. Orissa Weavers Co-operative Spinning Mills though the product in issue in the two cases were quite different. I am unable to concur with this observation since it may be seen from paragraph 6 of the judgement (at page 324 of the report) that the above submission was taken note of, considered and, for reasons stated, the Tribunal held that the decision in the Orissa Weavers Co-operative Spinning Mills case was applicable and not the decision in the Aditya Mills Ltd. case 1983 ELT 1853.
2. The distinction pointed out was that in the Aditya Mills case the constituent yarns fell under different tariff entries while in the Orissa Weavers Co-operative Spinning Mills case the constituent yarns fell under the same entry under which the final product also fell. As earlier mentioned, the same is the situation in the present case and I, therefore, agree that the classification of the product in issue would be under item 18-III (i), CET.
3. Shri Anand has further held that insofar as the resultant yarn was a new product, having a distinct market and use, there has been manufacture of a new commodity and, following the decision of the Supreme Court in the Empire Industries case 1985 Vol. 20 ELT 179 and the decisions of the Tribunal in the cases of Guardirn Plasticote Ltd. and Sreenivasa Metal Industries (supra) the resultant product was again liable for duty though it may be under the same item as the constituent yarns. As was pointed out during the hearing the resultant duty liability would, even if the said conclusion is correct, be nil since the rate of duty is specific and not ad valorem. However it appears to me that the conclusion regarding fresh duty liability would not be correct. This is for the reason that in the Empire Industries case, as well as the Guardian Plasticote case, the relevant entries were “all sorts” entries whereas 18-III is not one such. If an entry specifically describes several products each of them would be liable for duty as and when each of them emerges, though may be one from the other, by the application of a manufacturing process. This is for the reason that each product as described in the entry is specifically dutiable. Similarly if and entry reads “all sorts” as in the cases cited supra, the result would be that each of the products that emerges, after the application of the manufacturing process, even if it may be to one of the products already falling in the entry, would become liable for duty in the same manner as if each of them had been separately enumerated. Since neither is the case under item 18 III, I am of opinion that the resultant product in the instant case, arising out of the application of the process to the constituent yarns falling under the same item, would not become liable for duty again.
4. However, it may be noted that the present appeal arose out of an order on the classification list regarding the proper classification of the product in issue. The determination of the actual duty liability of a given quantity is not in issue in these proceedings. It is not even known whether any duty demand had been raised and if so how the said demand had been disposed of.
5. Since, therefore, the subject matter of the appeal is only a question of classification I agree that the proper classification is under item 18-III(i), CET. My order, therefore, is that the appeal shall stand allowed, orders of the lower authorities shall be set aside and the classification be ordered under item 18-III(i), CET.
16-5-1988
G. Sankaran Sr. V.P.
I agree with Brother Shri Raghavachari.