2014 (9) TMI 536 - HC - Central Excise

Court rules 'MONTFORT' process not manufacture under Act. Appeal rejected, Department can approach Supreme Court.

Commissioner of Central Excise Versus M/s. KG. Denim Ltd.

The Court dismissed the appeal, holding that the process undertaken by the assessee using the 'MONTFORT' machine did not amount to manufacture under the ... Classification of goods - assessee is engaged in the making of denim fabrics for which the company uses air jet looms, which are shuttle-less looms - in the process of making denim fabrics, the company undertakes an operation, whereby the cloth is subject to a process through a machine called 'MONTFORT' machine and that the denim cloth undergoes processing in the 'MONTFORT' machine - According to the assessee, it does not amount to manufacture and, therefore, not liable for duty - Adjudicating held issue in favour of assessee - Held that:- From a bare reading of the Section 35-L, more particularly sub-section (b), it is clear that the said Section stands attracts to the facts of the present case. The decisions, cited by the learned counsel for the respondents, more particularly, Navin Chemicals case (1993 (9) TMI 107 - SUPREME COURT OF INDIA), would clearly reveal that the Courts have consistently held that where the issue directly involves, among other things, determination of rate of duty, the matter should be agitated before the Supreme Court - issue involved relates to classification of products and, therefore, this appeal is not maintainable before this Court - Decided against Revenue. Issues:1. Whether the process undertaken by the assessee amounts to manufacture as defined under the ActRs.2. Whether the conclusion of the adjudicating authority regarding the process undertaken by the assessee is legally correctRs.Analysis:Issue 1: The respondent, engaged in making denim fabrics, uses a machine called 'MONTFORT' in the process. The department claims this process amounts to manufacture and attracts duty, while the assessee disagrees. The adjudicating authority favored the assessee, but the department appealed. The Tribunal upheld the Commissioner's order, leading to the current appeal by the Department.Issue 2: The key question is whether the 'MONTFORT' machine process constitutes manufacture. The respondent relied on Section 35-L of the Central Excise Act, stating that issues related to excise duty rate must be appealed to the Supreme Court. Citing precedents like Navin Chemicals case, it was argued that matters involving duty determination should go to the Supreme Court. The Court concurred, holding that the issue pertains to product classification and is not within its jurisdiction. Consequently, the appeal was dismissed, allowing the appellant to approach the Supreme Court within 60 days.This judgment clarifies the distinction between manufacturing processes and their duty implications, emphasizing the necessity of appealing to the appropriate court based on the nature of the issue at hand.