Manufacture test for fibre cutting: converting polyester tow into staple fibre did not create a new excisable product.

Cutting polyester fibre tow into staple fibre was held not to amount to manufacture because no new or commercially distinct product came into existence; mere reduction in length did not create a separate excisable commodity. The tariff treated man-made fibres as a single class, and the exemption notifications placed tow and staple fibre on the same footing, with the proviso operating only to prevent double taxation where duty had already been paid on tow. On that basis, the fibre-cutting activity did not attract separate central excise duty or a licence requirement, and the related duty demand and penalty could not be sustained.

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Issues: Whether cutting polyester fibre tow into staple fibre amounted to manufacture attracting fresh central excise duty and licence requirements, and whether the duty and penalty demand could be sustained.

Analysis: The material purchased by the appellants was held to be tow and not waste, as it was in running length and substantially answered the description of tow notwithstanding the description in the documents. The relevant tariff entry treated man-made fibres as a single class without a separate levy based on length, form, or stage of the fibre. Applying the settled test of manufacture, mere cutting of tow into staple length did not bring into existence a new substance or a commercially distinct product. The exemption notifications also placed tow and staple fibre on the same footing and the proviso merely avoided double taxation where duty had already been paid on tow; it did not create a charging provision. On these facts, the fibre-cutting activity did not attract a separate duty liability or a requirement to obtain a licence.

Conclusion: The appellants were not liable to central excise duty on the cutting activity, and the demand as well as the penalty could not be sustained.

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