TaxTMI 
TaxTMI 
2006 (9) TMI 5
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....the manufacture and export of cotton yarn. It purchases cotton from the domestic market for the manufacture of yarn. After the cotton is purchased it is subjected to carding and combing and only thereafter it is spun into yarn. According to the appellant, carding involves opening and separating out of fibres together with effective cleaning and combing is a process by which impurities and undesired short fibres are removed. During carding and combing. the fibre and noils can be separated and they are collected in one place by suction. This, according to the appellant, is a waste generated at the preparatory stage and it is cotton waste, it is impure cotton fibre. 3. Earlier, the appellant was paying duty on this cotton waste before clear....
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....ntroduced cove cotton waste. The said Bill after having been passed received the assent President of India on 26-5-1995 and thus became the Finance Act, 1995. On 4-12-1995 the Department issued a notice to the appellant to show cause why duty on the quantity of soft cotton waste cleared by the appellant and sold in the Domestic Tariff Area during the period from 1-5-1995 to 31-7-1995, be not imposed in terms of the proviso to Section 3(1) of the Act read with the concerned notification. Yet another notice was issued by the Department dated 22-7-1996 covering the period prior to the one covered by the earlier notice, the period from 16-3-1995 to 30-4-1995. The Department sought to invoke the extended period of limitation available under Sect....
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....ellate Tribunal imposed a condition that the appellant should deposit Rs. 8 lakhs towards the duty and Rs. 1 lakh towards the penalty before the appeals could be heard. According to the appellant the said sum was deposited on 31-10-1997. Before the Appellate Tribunal, the appellant contended that no manufacture was involved while soft cotton waste was being produced from the Cotton that was being cleaned for the purpose of making yarn for being exported and since there was no manufacture involved, no duty was leviable on soft cotton waste sold in the Domestic Tariff Area. It was also submitted that merely because the Finance Act has introduced an entry under Heading 52.02 in the first schedule to the Central tariff Act covering cotton waste....
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....Counsel submitted that cotton waste thus generated itself and in the absence of any process of manufacture being involved, the mere fact that such cotton waste produced is sold regularly in the Domestic Tariff Area, would not make the same exigible to excise duty. He further contended that Heading 52.02 covering 'cotton waste' was introduced only by the Finance Act 1995 enacted on 26-5-1995 and it did not have effect from the date of introduction of the Finance Bill. He referred to Section 3, the charging section and emphasized that "it must be actually produced or manufactured before excise duty could be imposed". He also submitted that the Department was not entitled to have the benefit of the extended period of limitation and the demand ....
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....ated during the process of manufacture of yarn. In other words, when cotton purchased in the domestic market is used for manufacture of yarn, by initiating the process of manufacture, at an intermediate stage, the so called cotton waste is produced which is a marketable commodity and which is regularly marketed. Therefore, one of the twin tests, namely, that the commodity which is produced is marketable and is regularly marketed as a product, is satisfied. It is by now established that merely because a commodity is included in the schedule, it will not be exigible to duty unless a process of manufacture is involved when that product emerges. Here, heading 52.02 has been brought in the Schedule by the Finance Act, 1995. Though it is shown as....
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....(S.C.)] is relied on in support. 10. The scope of the expanded definition of manufacture has been considered in the decision in Shyam Oil Cake Ltd. v. Collector t Central Excise, Jaipur [2004 (174) E.L.T. 145 (S.C.)). The appellate authority has essentially proceeded on the amendment to the schedule and inclusion of cotton waste therein and the admission of the representative of the appellant that subsequent to the inclusion in the schedule, cotton waste is taxable. It appears to us that the question whether cotton waste is dutiable as a manufactured product requires to be reconsidered by the tribunal in the light of the various decisions of this Court brought to our notice and which may hereafter be brought to the notice of the Tribunal....