Cutting fabric into towel and napkin sizes was not prima facie manufacture of made-up articles under tariff law.

Cutting grey knitted pile fabric into towel and napkin sizes, before stitching and hemming, was held not to be prima facie manufacture of "made-up" articles under Section Note 5 of Section XI of the Central Excise Tariff Act, 1985. The note was treated as exhaustively defining "made-up" for Chapter 63, and the mere cutting process was found insufficient on a prima facie basis to attract duty liability. As a result, the applicants were regarded as having a strong prima facie case against the demand, and unconditional stay of recovery was warranted.

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Issues: Whether cutting grey knitted pile fabric into the sizes of towels and napkins, before stitching and hemming, amounted to manufacture of "made-up" articles so as to justify duty liability and pre-deposit.

Analysis: Section Note 5 of Section XI of the Central Excise Tariff Act, 1985 exhaustively defines "made-up" for the purposes of Chapter 63. On a prima facie reading, cutting fabric into towel and napkin sizes does not by itself amount to manufacture of a made-up article within that definition. The Tribunal therefore found that the applicants had a strong prima facie case against the duty demand.

Conclusion: The activity of cutting the processed fabric into towel and napkin sizes was not prima facie sufficient to treat the goods as made-up articles, and unconditional stay of recovery was warranted.

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