COLLECTOR OF CENTRAL EXCISE Vs. MADURA COATS LTD

JUDGEMENT

(1.) In this appeal, the Collector of Central Excise and others have challenged the propriety of the Judgment of a learned single Judge of this Court making the Rule NISI obtained by the respondent company Madura Coats Ltd., absolute.

(2.) The case of the respondent is that it is required by some of its customers, such as Dunlop India Limited, to arrange nylon or rayon yarns supplied by them in parallel rows loosely held together by cotton varns sun plied by the respondent. Such arrangement of rayon or nylon cards is called a tyrecord warpsheet. To make a warpsheet, the respondent first winds the nylon or rayon yarns supplied by its customers into bobbins. The yarns are then twisted in a twisting machine and thereafter used as warps on a loom; the cotton yarns being used at widely spaced intervals as wefts to hold the nylon or rayon yarns in position. A given length of warpsheet will have 99'4% of nylon yarns and 9.8% of cotton yarns. No manufacturing process involved in making warpsheets and no new commodity known to commerce or industry comes into being when yarns are arranged or assembled to form warpsheets. A warpsheet continues to be known as yarns commercially and in industry even after the arrangement mentioned above. The nylon or rayon yarns in the warpsheets are used by the respondent's customers in the manufacture of motor car tyres, and it is convenient in such manufacture to have the yarns arranged or assembled in the form of a warpsheet. The cotton yarns holding the nylon or rayon together are destroyed in the manufacture of tyres and are not necessary for such manufacture, their only use or function being to hold the arrangement or assemblage of nylon or rayon yarns together.

(3.) The Collector of Central Excise by his memo dated March 24, 1975 addressed to the respondent had taken the view that a flylon or rayon warpsheet is an item of manufacture by itself and as it does not come under any of the Tariff Entries Nos. 1 to 66 of the First Schedule to the Central Excises and Salt Act, 1944, it will come under the residuary Entry 68 as "goods, not elsewhere specified" and liable to duty at the rate of 1% ad valorem. In that view of the matter, the Central Excise Authorities have been demanding payment of excise duty from the respondent for the nylon and rayon warpsheets. The respondent has since paid such duty under protest for the period between March 24, 1975 and May 7, 1975.