In The High Court Of Judicature For Rajasthan At Jodhpur

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR -------------------------------------------------------CENTR.EXCISE APPEAL No. 12 of 2006 UNION OF INDIA V/S M/S SUNCITY THREADS LTD. Mr. RISHABH SANCHETI on behalf of Mr. VK MATHUR, for the appellant / petitioner Mr. DINESH MEHTA, for the respondent Date of Judgment : 14.8.2008 HON'BLE SHRI N P GUPTA,J. HON'BLE SHRI KISHAN SWAROOP CHAUDHARI,J. JUDGMENT -------BY THE COURT (PER HON'BLE GUPTA, J.): This appeal, by the revenue, has been filed against the order of the Tribunal dated 1st September 2004, dismissing the appeal of the revenue, which was filed against the order of a Commissioner of Central Excise, dated 26.08.2002. The appeal was admitted vide order dated 22.05.2006, by formulating two substantial questions of law as under :“(1) Whether in the facts and circumstances of the case, the article sewing thread is a product which comes into existence by way of manufacturing from doubled and multi fold yarn and therefore, is not governed by exemption Notification No.84/95-CE dated 1995? (2) Whether the amendment introduced in Chapter 55, by putting a Chapter Note w.e.f. 26.5.95 had altered the position in respect of sewing thread than it was existing before such chapter note was introduced?” The learned Commissioner, by said order dated 26.08.2002, decided the controversy, relating to availability of exemption, from excise duty, for the two spell of times; being 01.03.1994 to 17.05.1995, and for 18.05.1995 to 07.11.1995, and in Para 22, held that the duty is demandable from the assessee, in respect of sewing thread of polyester staple fiber, manufactured and cleared without payment of duty, during the period from 01.03.1994 to 17.05.1995. For arriving at this finding, it was considered, that the project is not exempt from payment of excise duty. Then, for the subsequent period, from 18.05.1995 to 07.11.1995, it was considered, that Notification No.35 of 1995 dated 16.03.1995 was amended vide notification No.84 of 1995 dated 18.03.1995, and by that amendment specified processes of all yarns falling under Chapter 55 were covered within the scope of aforesaid notification for exemption, and therefore, relying upon another judgment of the Tribunal in

Ayyappa & Co. Vs. CCE, Coimbtore, reported in 1998(103) ELT 255, held, that the assessee was entitled to the benefit of Notification No.35 of 1995, as amended by notification No.84 of 1995 dated 18.03.1995, and the demand for that period was found to be not sustainable. Consequently, the order of confiscation etc., were also set aside. From these two parts of the order, two appeals were filed, before the Tribunal. The revenue filed the appeal, with respect to the findings for the period 18.05.1995 to 07.11.1995, while the assessee filed appeal, with respect to the period 01.03.1994 to 17.05.1995. The assessee's appeal, being Appeal No.2383/02, has been allowed by the final order dated 29.07.2003, by finding, that Chapter Note was introduced in Chapter 55 w.e.f. 26.05.1995, which provided that conversion of any form of yarn into another form of yarn amounts to manufacture, and that, during the period in question, there was no such chapter note, and therefore, the activity of the assessee, was not found to be amounting to manufacture. For this proposition, learned Tribunal relied upon other order of the Tribunal dated 27.12.2002, passed in Appeal of CCE Vs. Anand Threads. Admittedly, this order, dated 29.07.2003, has not been appealed by the revenue any further, and it has become final. Thus, the controversy, in the present appeal, relates only to the subsequent period from 18.05.1995 to 07.11.1995. The Tribunal, in this regard found, that the issue is settled by the Tribunal, in the case of Ayyappa Vs. CCE (supra), and thus, did not find any infirmity in the impugned order. The question, as formulated by this Court, on 22.05.2006, in substance, comprehends the questions, as to whether the product, which comes into existence, by way of manufacturing, is not governed by the exemption notification No.35/95, as amended by notification No.84 dated 18.03.1995, and the other question comprehends the effect of introduction of Chapter note in Chapter 55 w.e.f. 26.05.1995. In our view, the second question, need not detain us, in the circumstances of the present case, because, the effect of introduction of Chapter 55, w.e.f 26.05.1995, is only to bring the activity of the assessee, within the four corners of definition of 'manufacture', as contained in Sec.2(f) of the Central Excise Act, and for the present purposes, i.e. for the period from 18.05.1995 to 07.11.1995, it is not the controversy before us, as to whether the activity of the assessee amounts to manufacture or not, rather, the controversy basically and fundamentally is, as to whether the product of the assessee is governed by the exemption notification No.35 of 1995 dated 16.03.1995, as amended by notification No.84 of 1995 dated 18.03.1995, or not? A combined look, at the notification No.35 of 1995, and 84 of 1995, would show, that in the table, in column No.3, the description of goods has been given, with respect to which, the exemption was provided, and in column No.5 conditions were given, subject to which the exemption would be available. So far as column No.5 is concerned, it is not in dispute, that the manufacture is out of the yarn, falling under Chapter 55, which is one of the Chapters, which is included in column No.5, therefore, we need not detain ourselves on column No.5. Then, we come to column No.3, and a look at column No.3 of notification No.35 of 1995 would show, that in the description of goods, at Item No.1 & 2, which are relevant: sewing thread, or doubled, or multifold, including cabled yarn, was specifically excluded, by being put in the brackets as “other than”. Thus, per force, notification No.35 of 1995, the product of the assessee, was clearly excluded from the exemption notification, but then, this

notification No.35 has been amended by notification No.84, and the exclusion part in column No.3, has deleted, and the description of the goods exempted, reads as under: “Yarn subjected to beaming, warping, wrapping, winding or reeling or any one or more of these processes, with or without the aid of the power”. In the present case, the product, at best, is the product, which is a yarn, subjected to winding, and/or reeling. In that view of the matter, it is more than clear, that the goods manufactured by the assessee, are very much governed by the exemption notification No.35 of 1995 dated 16.03.1995, as amended by notification No.84 of 1995 dated 18.03.1995. Thus, the question No.1 is answered in favour of the assessee, and against the revenue. Consequently, we do not find any force in the appeal, the same is therefore dismissed. (KISHAN SWAROOP CHAUDHARI ),J. jpa/

( N P GUPTA ),J.