COMMISSIONER OF CENTRAL EXCISE, CHENNAI-II COMMISSIONERATE & ORS. ETC. vs. M/S. TARPAULIN INTERNATIONAL & ORS. ETC.

CIVIL APPEAL No. 5341/2005Supreme Court[2010] 9 S.C.R. 62004 August 2010Bench: 2 JudgesAuthor: D.K. JAIN, H.L. DATTU12 pages
AI SummaryDismissed

What were the facts?

The Revenue filed these appeals challenging the order of the Customs, Excise and Service Tax Appellate Tribunal. The assessee, M/s. Tarpaulin International, was engaged in producing and selling 'tarpaulin made-ups'. These were prepared by cutting tarpaulin fabric into various sizes, stitching them, and fixing eyelets. The assessee contended that this process did not constitute 'manufacture' and therefore, excise duty could not be levied. The department, however, viewed the process as manufacturing, making the 'tarpaulin made-ups' exigible to duty under the Central Excise Tariff Act, 1985. A show cause notice demanded duty of Rs. 57,33,262/-. The Commissioner of Central Excise initially remitted the matter for de novo adjudication, and subsequently held that tarpaulin made-ups were covered under Tariff heading 63.01, preferring the specific description.

What did the Supreme Court hold?

The Supreme Court held that the conversion of tarpaulin into tarpaulin made-ups does not amount to manufacture. The Court reasoned that the process of stitching and fixing eyelets does not change the basic characteristic of the raw material or the end product, nor does it bring into existence a new and distinct product with total transformation. The original material is still called tarpaulin made-ups. For goods to be dutiable under excise law, they must be 'goods' known to the market, and marketability is an essential ingredient. Even if there is value addition, it is minimal, and to attract duty, there must be a manufacture resulting in different goods known in the market as such. Therefore, there can be no levy of Central Excise duty on tarpaulin made-ups. The Tribunal was held to be correct in its finding.

What were the issues?

1. Whether the process of cutting and stitching tarpaulin fabric and fixing eyelets to create 'tarpaulin made-ups' involves 'manufacture' as defined under Section 2(f) of the Central Excise Act, 1944, making them dutiable under the Central Excise Tariff Act, 1985? Assessee's Contention: The assessee argued that the mere processes of cutting, stitching, and fixing eyelets do not amount to manufacture, as they do not bring into existence a new and distinct product with a total transformation of the original commodity. The product remains identifiable as tarpaulin made-ups. Revenue's Contention: The revenue contended that the preparation of 'tarpaulin made-ups' by cutting, stitching, and fixing eyelets constitutes manufacture, and therefore, the goods are exigible to excise duty under the Central Excise Tariff Act, 1985, specifically under sub-heading 63.01.

Which sections of the Income-tax Act were involved?

Section 2(f)

AI-generated summary — verify with the full judgment below

[2010] 9 S.C.R. 620 A COMMISSIONER OF CENTRAL EXCISE, CHENNAl-11 B c COMMISSIONERATE & ORS. ETC. v. M/S. TARPAULIN INTERNATIONAL & ORS. ETC. (Civil Appeal No. 5341 of 2005 etc. etc.) AUGUST 04, 2010 [D.K. JAIN AND H.L. DATTU, JJ.)

Central Excise Tariff Act, 1985: First Schedule - Heading 63.01 - Tarpaulin made-ups - Levy of excise duty on - HELD: Merely because certain item falls within the Schedule, it would not be dutiable under the Excise Law, if the said article is not 'goods' known to the market - Marketability is an essential ingredient for goods to D be dutiable under the Schedule - Therefore, there can be no levy of excise duty on tarpaulin made ups - Central Excise Act, 1944. E Central Excise Act, 1944: s. 2(f) - 'Manufacture' - Tarpaulin made-ups - Prepared by cutting tarpaulin from tarpaulin, sheets, stitched and eye- lets fixed thereto - HELD: The original material used i.e. the tarpaulin, is still called tarpaulin, made-ups even after F undergoing the said process - Tribunal rightly held that conversion of tarpaulin into tarpaulin made-ups would not amount to manufacture - Central Excise Tariff Act, 1985. In the instant appeals filed by the

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