Collector of Central Excise, Meerut Vs. M/S. Kapri International (P) Ltd.
 Insc 233 (30
Hegde & Shivaraj V. Patil Santosh Hegde, J.
Assistant Collector of Central Excise had made a demand on the respondent for
clandestine clearance of bed-sheets, bed spreads etc. The said demand was
confirmed by the Commissioner of Central Excise along with the demand made for
wrongful availment of benefits under Notification dated 1.3.1983 for the period
1983-85 as also the order of seizure of goods with an option to the respondent
to redeem the same, if it so desired, on payment of a redemption fine with a
further direction to pay a penalty of Rs.25 lacs. Against the said order, the
respondent preferred an appeal before the Customs, Excise & Gold (Control)
Appellate Tribunal (for short 'the tribunal') which by its order dated 3.8.1998
allowed the said appeal.
aggrieved by the said order, the Revenue has preferred this appeal before us.
Learned Attorney General appearing for the appellant, contended that though the
items, namely, bed-sheets, bed spreads, table clothes, napkins etc. are
manufactured by the respondent by cutting cotton fabrics from running length
through their sister concern M/s. Dior International, the finished products
were totally new marketable commodities, having distinct market identity.
even though the material, namely, the cotton fabrics had earlier been subjected
to duty in view of the fact that new products after the process of manufacture
had emerged, which are marketable on their own identity as bed-sheets, bed
spreads, table clothes, napkins and pillows made of cotton fabrics, same are exigible
to duty again.
pointed out that though the tribunal specifically did not give a finding as to
the emergence of a new product from the running length of cotton fabrics, it
seems that the tribunal proceeded on the basis that such a new product had
emerged but the same was not exigible to fresh duty because the cotton fabric
from which the new product was made, had already suffered duty under Tariff
Item 19(I). Learned Attorney General argued that this view of the tribunal that
once the raw-material suffers duty under a particular tariff item, any new
product emerging out of the process of manufacture from such material cannot be
made exigible to the levy of duty under the very same tariff item, is erroneous
and cannot be sustained.
have perused the order of the original authority as well as that of the
tribunal. We have no doubt that by cutting the cotton fabrics from running
length into small pieces and giving them a definite required shape to form new
articles like bed sheets, bed spreads, table clothes etc., the respondent has
produced a new commodity which has a definite commercial identity in the market.
pertinent question, therefore, is : whether such new article is exigible to
duty under Tariff Item 19(I) or not ? The tribunal has held that since the
raw-material has already suffered a duty under a particular tariff item,
namely, Tariff Item 19(I), the product manufactured by such material, is not exigible
to levy of duty. In our opinion, this view of the tribunal is not correct. This
Court in the case of Laminated Packings (P) Ltd. v. Collector of C. Ex. (1990
 ELT 326 SC), in a similar situation, had held thus :
further contention urged on behalf of the appellant that the goods belong to
the same entry is also not relevant because even if the goods belong to the
same entry, the goods are different identifiable goods, known as such in the
market. If that is so, the manufacture occurs and if manufacture takes place,
it is dutiable. 'Manufacture' is bringing into being goods as known in the
excise laws, that is to say, known in the market having distinct, separate and
identifiable function. On this score, in our opinion, there is sufficient
evidence. If that is the position, then the appellant was liable to pay
duty." It is evident from the above that the mere fact that the material
from which the new goods are manufactured, has suffered a duty under a
particular tariff item that does not exclude the finished product from being exigible
to fresh duty if the Tariff Act provides for it. In the instant case, though
the cotton fabric had suffered duty under Tariff Item 19(I), the Tariff Act has
made bed sheets, pillow covers etc. also dutiable under the very same tariff
item, therefore, the respondent is liable to pay duty on bed sheets, pillow
covers, napkins etc. manufactured by it.
the reasons stated above, this appeal is allowed, the impugned judgment/order
of the tribunal is set aside and that of the Commissioner restored.