Supreme Court reprieve for tarpaulin made-ups

The multi-crore fast growing industry engaged in manufacture of tarpaulin made-ups, used for covering food grains, in the armed forces and at ports among others, has got a major boost with the Supreme Court ruling that the all-weather covers are free from excise duty.

Though tarpaulin ‘made-ups’ are covered under the heading 63.01 of the Central Excise Tariff schedule, excise duty can’t be levied on them unless an article is known as ‘goods’ in the market, the apex case has ruled.

Several manufacturers of tarpaulin ‘made-ups’ had contested the levy of excise and got varied orders.

While the tax authorities insisted the products manufactured by them were subject to the duty, the Customs, Excise and Gold (Control) Appellate Tribunal (Cegat), South Zonal Bench at Chennai overturned the orders passed by the Commissioner of Central Excise.

Aggrieved by its order, which resulted in substantial loss of revenue for the exchequer, the Commissioner moved the Supreme Court saying the duty had been imposed because tarpaulin sheets undergo change in their form after their treatment, like the sheets are stitched and eyelets are made in them.

However, a bench of justices DK Jain and HL Dattu on Thursday said, “In our view, it does not change basic characteristic of the raw material and end product.’’

The original material used, i.e. the tarpaulin, is called tarpaulin made-ups even after undergoing the process and therefore can’t be said to be a manufacturing process, the judges said, dismissing the Commissioner’s appeals challenging the Cegat order.

According to them, there can be no levy of central excise duty on the tarpaulin made-ups. The process of stitching and fixing eyelets would not amount to manufacturing process since tarpaulin after stitching and eyeleting continues to be only cotton fabric. The purpose of fixing eyelets is not to change the fabrics. Therefore, even if there is value addition, it is minimal.

Among other industries engaged in making ‘made-ups’ and have benefited from the court’s judgment are Tarpaulin International, Rohini Mills, Geotex Mills, Bharat Textile Proofing Industries, Pondicherry Water Proofers and F Harley and Co.