Processing of knitted pile fabric did not change its unprocessed character, preserving exemption eligibility.

CEGAT held that shearing, cropping and back-coating of knitted pile fabric did not amount to manufacture or processing where the operations did not bring about a lasting change or create a commercially different product. On the facts found, the fabric retained its unprocessed character despite those treatments, so it continued to qualify for exemption under Notification No. 6/2000-C.E. dated 01.03.2000. The Revenue's challenge therefore failed, and the assessee's exemption claim was upheld.

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Issues: Whether the processes of shearing, cropping and back-coating undertaken on knitted pile fabric amounted to processing so as to take the fabric out of the category of unprocessed fabric and deny exemption under Notification No. 6/2000-C.E. dated 01.03.2000.

Analysis: The Tribunal noted that the controversy turned on the factual effect of the operations performed on the fabric. The line of decisions relied upon showed that shearing or cropping, and back-coating with acrylic emulsion followed by drying, did not necessarily bring about a lasting change or create a commercially different commodity. The Supreme Court's observation that such matters depend on the particular facts of each case was also applied. On the facts found, the fabric continued to retain its unprocessed character even after the stated operations.

Conclusion: The processes did not amount to manufacture or processing of the fabric. The fabric remained unprocessed and was eligible for the benefit of Notification No. 6/2000-C.E. dated 01.03.2000.

Final Conclusion: The Revenue's challenge failed, and the exemption claimed by the assessee was upheld.

Ratio Decidendi: Where the operations on knitted pile fabric do not bring about a lasting change or produce a commercially different product, the fabric remains unprocessed and does not cease to be eligible for the exemption available to unprocessed fabric.

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