In a very important and having far reaching effects, CESTAT held that "by applying starch with some chemicals and the special process identified, the fabrics acquire the quality of stiffness and sheets which vanishes after a couple of washes. Such a process which does not bring into existence goods with a new name."

And therefore, the impugned activity is not amounting to manufacture.

Further, the above processes are not subject to deemed manufacture as defined in Note No. 3 of the Chapter 52, of First Schedule of Central Excise Tariff Act, 1985

CESTAT on the issue of inclusion of the term "any other process", held that

"The expression 'any other process' is used in the context of what constitutes manufacture in its extended meaning and the expression 'unprocessed' in the exempting notification draws its meaning from that context. As per the ratio of the above judgment, any activity such as padding with starch and chemicals, and special finishing are not processes of manufacture. Therefore subjecting cotton polyester dyed lungi fabrics to padding and the special processes, we find, do not constitute manufacture."

 

(For full text of judgment - visit 2008 -TMI - 30621 - CESTAT, CHENNAI)

 

Manufacture classification: finishing processes that do not create a new article are not treated as manufacture for excise. The tribunal found that washing, stentering, calendaring, chemical padding and special finishing that impart temporary stiffness do not produce goods of a new name and therefore do not constitute manufacture for excise purposes; such activities also do not amount to deemed manufacture and the phrase 'any other process' must be read in the extended sense of manufacture, so these finishing processes on dyed cotton-polyester lungi fabrics fall outside excisable manufacture.