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of <h1>Cutting & Stitching Tarpaulin Not Manufacturing: Excise Duty Exemption Upheld</h1> <h3>Commissioner of Central Excise, Chennai-II Commissionerate Versus M/s. Tarpaulin International and others</h3> Commissioner of Central Excise, Chennai-II Commissionerate Versus M/s. Tarpaulin International and others - 2010 (256) E.L.T. 481 (SC) , [2010] 28 STT 53 ... Issues Involved:1. Whether the process of converting 'Tarpaulin Fabrics' into 'Tarpaulin made-ups' amounts to manufacture.2. Whether the said process would amount to manufacture as defined under Section 2(f) of the Central Excise Act, 1944.Detailed Analysis:1. Whether the process of converting 'Tarpaulin Fabrics' into 'Tarpaulin made-ups' amounts to manufacture:The core issue in these appeals is whether the process of cutting, stitching, and fixing eyelets to tarpaulin fabric to create 'tarpaulin made-ups' constitutes a manufacturing process under the Central Excise Act, 1944. The Commissioner of Central Excise initially held that this process does amount to manufacture, classifying the tarpaulin made-ups under Tariff heading 63.01, making them subject to excise duty. The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) disagreed, finding that the conversion process did not result in a new product with a distinct name, character, or use, thus not constituting manufacture. The Tribunal relied on the Andhra Pradesh High Court decision in TRC No. 215/90, which held that stitching and adding eyelets did not materially alter the essential character of the fabric.2. Whether the said process would amount to manufacture as defined under Section 2(f) of the Central Excise Act, 1944:The definition of 'manufacture' under Section 2(f) of the Central Excise Act includes any process incidental or ancillary to the completion of a manufactured product and any process specified in relation to any goods in the Schedule or Chapter Notes of the Central Excise Tariff Act, 1985. The Supreme Court has consistently held that for a process to be considered manufacture, it must result in a transformation where a new and distinct article emerges, having a distinctive name, character, or use. This principle was reiterated in several judgments, including Tungabhadra Industries v. CTO, Union of India v. Delhi Cloth & General Mills Co. Ltd., and South Bihar Sugar Mills v. Union of India. The Court emphasized that mere processing or change is insufficient; there must be a substantial transformation.In this case, the Supreme Court found that the process of stitching and fixing eyelets to tarpaulin did not change the basic characteristic of the raw material. The end product remained essentially the same - tarpaulin fabric. The process did not bring into existence a new and distinct product with a total transformation in the original commodity. Consequently, the tarpaulin made-ups could not be considered as manufactured goods subject to excise duty.Conclusion:The Supreme Court upheld the Tribunal's decision, concluding that the conversion of tarpaulin fabric into tarpaulin made-ups does not amount to manufacture under Section 2(f) of the Central Excise Act, 1944. The process of cutting, stitching, and adding eyelets does not result in a new and distinct article with a different name, character, or use. Therefore, the tarpaulin made-ups are not subject to central excise duty. The appeals filed by the Revenue were dismissed with no order as to costs.
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