Textile processing and manufacture: shearing and back-coating did not create a new dutiable product or alter grey fabric permanently.

Shearing, back-coating and allied operations on knitted pile fabrics were held not to amount to manufacture under Chapter Note 4 to Chapter 60 because those processes were not akin to the specified textile processes and did not cause the permanent or lasting change contemplated by the note. The fabric remained essentially unchanged in character, so it did not cease to be grey fabric or become a commercially different dutiable product. A new plea based on electrifying polish was also rejected because it was not properly supported by the show cause notice. The goods therefore remained within the exempt category of unprocessed knitted fabric.

---

---

Issues: (i) Whether shearing, back-coating and allied processes undertaken on knitted pile fabrics amounted to manufacture under Chapter Note 4 to Chapter 60 of the Central Excise Tariff Act, 1985; (ii) Whether those processes brought about such a permanent or lasting change in the fabric that it ceased to be grey fabric and became dutiable.

Issue (i): Whether shearing, back-coating and allied processes undertaken on knitted pile fabrics amounted to manufacture under Chapter Note 4 to Chapter 60 of the Central Excise Tariff Act, 1985.

Analysis: Chapter Note 4 treats certain specified textile processes, and other processes of the same genus, as manufacture. The general words take colour from the specific processes listed in the note. Shearing and back-coating were found not to be comparable to the enumerated processes, and the factual findings showed that these operations did not introduce the type of permanent alteration contemplated by the note.

Conclusion: The processes did not amount to manufacture under Chapter Note 4.

Issue (ii): Whether those processes brought about such a permanent or lasting change in the fabric that it ceased to be grey fabric and became dutiable.

Analysis: The material on record showed that the fabric remained essentially unchanged in character after shearing and back-coating. No evidence established that the grey fabric was converted into a commercially different product or that the processes caused a lasting change. A new plea regarding electrifying polish could not be entertained where it was not properly founded in the show cause notice.

Conclusion: The fabric did not cease to be grey fabric and remained exempt as unprocessed knitted fabric.

Final Conclusion: The appeal failed because the disputed processes were not manufacture and the goods remained within the exempt category under the relevant notification.

Ratio Decidendi: For a textile process to amount to manufacture under Chapter Note 4, it must be akin to the specified processes and must bring about a permanent or lasting change that converts the grey fabric into a commercially different commodity; a new ground cannot be introduced without a supporting show cause notice.

---