COLLECTOR OF CENTRAL EXCISE, BOMBAY-IIversusKIRAN SPINNING MILLS, KOLSHET ROAD, THANE

           COLLECTOR OF CENTRAL EXCISE, BOMBAY-II
A
                                         v.
        KIRAN SPINNING            MILLS, KOLSHET ROAD, THANE

                              FEBRUARY 15, 198~

B     [SABYASACHI MUKHARJI AND S. RANGANATHAN, JJ.]

           Central Excise and Salt Act 1944: Section· 35L & Ministry of          1
     Finance Notification dated December 22, 1972-'Tow' and 'Staple           \ ·~
     fibre'-Distinction between-Running length fibre (tow) cut into short        -
     length fibre (staple fibre)-Substance obtained-Polyester staple
C    fibre-Excise duty-Liability for-Taxable event under excise law is
     'manufacture'.                                                       . -~

           Word & Phrases: 'Tow'-'Staple fibre'-'Manufacture'-Mean-
     ing of.
D
          The Central Excise Officers during the course of investigations          t .,,
    made against M/s Swastik Investment Company, Bombay found that
    some of the consignments of the material described in documents as
    'crimpled uncut waste' were cleared from M/s Swadeshi Polytex
    Limited, Ghaziabad during the period from January, 1974 to
E   December, 1977, were purchased by the respondents and utilised by            --f,
    them in the manufacture of 'polyester staple fibre'.

          The Collector held that the 'crimpled uncut waste' purchased by
    the respondents was in fact 'polyester fibre tow' and that the respon-
    dents had carried on manufacture of 'polyester staple fibre' from tow
F   and, as such, exigible to duty.

          Aggrieved by the Collector's Order the respondents filed an -~- ,,
    appeal before the Central Board of Excise and Customs. This appeal '..:'llf
    was transferred to the Customs Excise and Gold Control Appellate
    Tribunal in pursuance of s. 35-P of the Central Excises and Salt Act,
G   1944.

          The Tribunal on an examination of the material and the conten-
    tions came to the conclusion that what the respondents had purchased
    was already man-made-fibre but in running length, and that what they
    did in relation to it, was to cut it into. staple length after some manual
H   sorting and straightening and held that such cutting involved no
                                      1006
              COLLECTOR OF CENTRAL EXCISE v. KIRAN SPNG. MILLS             1007

 y   manufacture and hence no duty liability could be imposed.                     A

1          In the Appeal by the revenue to this Court on the question:
     whether there was exigibility to taxation on the item manufactnred by
     the respondent.
                                                                                   B
           Dismissing the Appeal.

            HELD: l. There is a distinction between 'tow' and 'staple fibre'.
     'Tow' 'is fibre in running length and 'staple fibre' is obtained by cutting
     it into required short length. I1009BI

             2. The taxable event under the Excise Law is 'manufacture'. C
   rl--:Mannfacture' means to bring into existence a new substance and does
 /      not mean merely to produce some change in a substance. I10090 I
 '
            3. Etymologically the word 'manufacture' properly construed
      would doubtless cover transformation, bot the qnestion is whether the
                                                                            0
      transformation in the instant case brings about fundamental change, a
-+    new substance is brought into existence, or a new different article
      having distinctive name, character or use results from a particular
      process or a particular activity. I1009D-EI

        In the instant case, it is not disputed that wbat the respondents
r did, was to cut the running length fibre (tow) into short length fibre E
  (staple fibre). indubitably brought a change in the substance but did
                     It
       not bring into existence a new substance. The character and use of the
       substance (man-made fibre) remained the same. By the change in the
       length of the fibre, the substance acquired a new name. But since the
       tariff entry recognised the single description 'man-made fibre' with no F
       further sob-division based on length of fibre and even without any
       distinct enumeration of the various forms of fibre by cutting long fibres
 ,_,,..into short ones, the respondents did not bring into existence any new
       product so as to attract any levy under the same tariff entry. Even by
       cutting, the respondents obtained man-made fibre. Such cutting, there-
       fore, involved no manufacture and, hence, no duty liability can be G
)'      imposed upon them. h009E-HJ

 y           Union of India v. Delhi Cloth & General Mills, 11963] 1 Snppl.
      SCR 586; Empire Industries Ltd. & Ors. etc. v. Union of India & Ors.
      etc., [1985] Suppl. 1 SCR page 292 and Mis Ujagar Prints v. Union of
      India, [1986] Suppl. SCC 652, referred to.                            H
    1008                  SUPREME COURT REPORTS            (1988] 2 S.C.R.

A         CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2891                 'y
    of 1984.

         From the Judgment and Order dated 28.2.84 of the Customs
    Excise and Gold Control Appellate Tribunal, New Delhi in Order
    No. 118/84-D.
B
        A.K. Ganguli, P. Parrneswaran and K. Swamy for the
    Appellant.

           The Judgment of the Court was delivered by

        SABYASACHI MUKHARJI, J. This is a statutory appeal under
C Section 35-L(b) of the Central Excise & Salt Act, 1944, hereinafter A
  called the 'Act', against the Order dated February 22, 1944 passed by \
  the Customs, Excise & Gold (Control) Appellate Tribunal, herein-
  after called the 'CEGAT'

D        In this appeal we are concerned with the question whether there
  was exigibility to taxation on the item concerned under the Act. It          1 ·-
  appears that during the course of investigations made against Swastik
  Investment Company, Boin bay, the Central Excise Officers found that
  some of the consignments of the material described in the documents
  as 'crimpled uncut waste' were cleared from M/s. Swadeshi Polytex
E Ltd., Ghaziabad, during the period from Jan'74 to Dec'77 and were            i
  purchased by the respondents herein and utilised in the manufacture
  of polyester staple fibre .. The Collector held that the so-called 'crimp-
  led uncut waste' purchased by the respondents was, in fact, polyester
  fibre tow and the staple fibre which were commercially two distinct
  products and the respondents had carried on manufacture of polyester
F staple fibre from tow and, as such, exigible to duty. The respondents
  filed an app.eal before the Central Board of Excise & Customs against - J . ,r
  the Collector's Order. The appeal was thereafter transferred to- 'J
  CEGAT in pursuance of Section 35--P of the Act.                            -

         It appears that there is distinction between a tow and staple
G fibre. The Ministry of Finance (Deptt. of Revenue)'s circular indicates
  as follows:
                                                                              y
               "'row is a collection of many parallel continuous filaments
              without twist which are grouped together in rope like form."

H              "Tow is used for the same purpose for which staple fibre is
             COLLECTOROFCEN1RALEXCISEv.KIRANSPNG.MILLS[MUKHARJI,J.] 1009


  y                   used. Tow is mainly converted into staple fibre and only a A
                      negligible quantity is converted directly into yam. It has
                      been therefore decided that duty should be levied on
                      Tow at the rate applicable to staple fibre (MF (DR & I)
                      F. No. 50/7/71-CX2dt. 22.12.72)".
                                                                                    B
                In other words, Tow is fibre in running length and staple fibre is
         obtained by cutting it into required short length. On an examination of
         the material and the contention, the Tribunal came to the conclusion
         that the material which the respondents had purchased was already
         man-made fibre but in running length. All that the respondents did in
         relation to it, was to cut it into staple length after some manual sorting

        -.
         and straightening. The question, therefore, is whether cutting the long C
         fibre into short fibre resulted into a new and different articles of com-
    t   "merce. Now it is well settled how to determine whether there was
         manufacture or not. This Court held in the case of Union of India v.
          Delhi Cloth & General Mills, I1963] 1 Suppl SCR 586 that 'manu-
         facture' means to bring into existence a new substance and does not D
          mean merely to produce some change in a substance (emphasis
.. t     supplied). It is true that etymological word 'manufacture' properly
          construed would doubtless cover the transformation but the question
          is whether that transformation brings about fundamental change, a
          new substance is brought into existence or a new different article
          having distinctive name, character or use results from a particular
          process or a particular activity. The taxable event under the Excise E
          Law is 'manufacture'. See in this connection Empire Industries Ltd. &

r         Ors. etc. v. Union of India & Ors. etc., [1985] Suppl. 1 SCR page 292
          and Mis Ujagar Prints v. llnion of India, [1986] Suppl. SCC 652. In the
          instant case it is not disputed that what the appellant did, was to cut
          the running length fibre (tow) into short length fibre (staple fibre). It
                                                                                     F
          indubitably brougbt a change in the substance but did not bring into
   , l existence a new substance. The character and use of the substance
     -,.. (man-made fibre) remained the same. It is true that by the change in
          the length of the fibre, it acquired a new name. But since in this case
           the tariff entry recognised the single description 'man-made fibre' with
           no further sub-division based on length of the fibre and even without G
           any distinct enumeration of the various forms of fibre by cutting long
           fibres into short ones, the respondents did not bring into existence any
   y new product so as to attract any levy under the same tariff entry. Even
           by cutting, the respondents obtained man-'made fibre. Such cutting,
            therefore, involved no manufacture and, hence, no duty liability can
            be imposed upon them.
                                                                                     H
    1010                  SUPREME COURT REPORTS             [1988] 2 S.C.R.

A         In that view of the matter and on the facts found by the Tribunal,
    we are of the opinion that the Tribunal was right in the view it took and
                                                                                {
    that decision needs no interference. This appeal, therefore, cannot be
    entertained and is accordingly dismissed.

    N.V.K.                                                Appeal dismissed.




                                                                                l




                                                                                y