Judgment:
1. The appellants undertook processing of grey fabrics received from the Merchant manufacturers. Information was received by the jurisdictional officers to the effect that the appellants were processing blowing wrapper cloth and clearing the same without payment of duty. The officers, therefore, visited the factory, seized some documents and also recorded the statements of the Director of the appellant's unit and several other persons. After completing investigation, show cause notice dated 20-7-1987 was issued seeking recovery of a sum of Rs. 12,69,073.47, being excise duty as well as handloom cess on such fabrics falling under Chapter 55 cleared during the period from July, 1983 to July, 1986. Confiscation of the land, building, etc. under Rule 173Q(2) was also proposed. It was alleged that the appellants were liable to a penalty under Rule 173Q(1). The Collector in his order dated 25-8-1988 confirmed the demand, imposed a penalty of Rs. 1 lakh, ordered confiscation of the land, building, etc., but, permitted redemption thereof on payment of a fine of Rs. one lakh.
2. The charge against the appellants is that they processed fabrics known as 'Blowing Wrapper Cloth' during the period 1-7-1983 to 31-7-1983 but failed to pay the duty leviable thereupon as attracted under [Tariff] Item No. 22(1)(b). In the appeal memorandum and during the personal hearing the grievance was made that the appellants had not been given adequate opportunity for hearing and that the Collector's action completing the adjudicating proceedings without hearing the appellants amounted to denial of natural justice. We have carefully considered this preliminary objection. The show cause notice was issued on 22-7-1987. Thereafter the appellants requested for supply of copies of the documents relied upon. The Collector's office permitted them to take out the copies. Thereafter several times the Collectorate asked them to take copies. It is a plea of the appellants that the copies were not made available. On this ground the appellants continued to delay the submissions of their reply to the show cause notice.
Subsequently the interim reply was filed in December, 1987. Another three months went by during which period the Collectorate continued to ask the appellants to take out the copies and the appellants kept on insisting that they were not being given the copies on their visits.
Ultimately, the copies were taken in March, 1988. The case was posted for hearing in June, 1988. Thereafter, for two months the appellants asked for adjournments on different grounds. Ultimately at the end of the August, 1988, the Collector after final warning fixed the hearing which the appellants did not choose to attend. The Collector has narrated the events and his reasons for going ahead with the finalisation of the case in three paragraphs in his order. He has also taken into account and has discussed in his order all the submissions made by the appellants in their replies to the notice. On perusal of the correspondence and various reasons we do not find that the appellants had any serious obstacles in either securing the copies of the documents relied upon or in attending the hearing when required.
The plea of denial of natural justice would stand when it is shown that the justice was denied unilaterally. If in spite of having been given sufficient opportunity, an assessee failed to appear for the personal hearing, then the cry of denial of natural justice lacks force.
3. The exact processing undertaken on the grey fabrics received by the appellants has come out in the statements of both Shri Sunil Mahajan and Runit Mahajan. Shri Sunil Mahajan, was a Director of the Appellant Company and Shri Runit Mahajan was partner of the sister unit of the appellants. Initially it was claimed that the processing was done only from middle of 1985. In later depositions both or them nave accepted processing during the enure period covered by the demand. These statements were recorded during the period 12-8-1986 to 11-2-1987. All the depositions made were consistent and complementary and were not retracted later on any occasion. The processes undertaken were pre-shrinking, scouring and heat setting, as per the statements of both the persons. It has been claimed that these processes were not those enumerated under the tariff as processes amounting to manufacture. It was claimed that they were dealing with grey cloth and were treating only that cloth which was soiled or became dirty during transportation or storage. We observe that the soiling of cloth during storage or transportation does occur but only on the portion exposed. It is very slight when compared to the total fabric in roll form. The amount of fabric processed by the appellants shows the falsity of their claim in this regard. It appeared that the department had not drawn any samples to determine whether the cloth was processed so to make it dutiable. In the reply to the show cause notice it was claimed that the cloth was scoured, that is washed in jiggers and dried on stenters. At the material time Tariff Item No. 22(1)(b) described the excisable fabrics as below : "(b) man-made fabrics, subjected to the process of bleaching, dyeing, printing, shrink-proofing, stentering, heat-setting, crease resistant processing or any other process or any two or more of these processes." The assessees has placed on record two test reports which are silent on the processing on the contested goods, although they cover their constructions and possible uses. As per the admission of the appellants the cloth was washed and dried using stenters. Drying and stentering were processes specified as a dutiable process. After washing, drying is done on heated rollers and stenters are used to ensure uniformity of width of the dried fabrics. Since the processes as described by the assessees are also occuring in the coverage of the tariff entry; the Collector has correctly arrived at the conclusion that the duty was to be paid on the fabrics so processed and cleared.
4. Although in the appeal memorandum the grievance was made that the extended period was not applicable and that the demand was barred by limitation, the ld. Advocate did not stress this point during personal hearing. Even otherwise, we find that the essential elements to invoke larger period were present in the show cause notice and were clearly brought out in the annexure thereto.
5. We now come to the dispute about classification. The Collector has rejected the assessee's claim of classification under Heading 59.09 in preference to the proposed classification under Chapter 55 after 1-3-1986. The Collector has based his logic on Part (A) of Note No. 7 to Chapter 59. Para (B) thereof makes for the exclusion of textiles articles of the kind used for technical purpose. The examples are textiles articles used in paper making or similar machine. As per the certificate of the BRTA, the contested goods are used as industrial fabrics in processing of textiles. The same is the opinion of the SASMIRA also. These were not presented before the Collector, being of later vintage nor did the Collector had the benefit of any other technical opinion. It is, therefore, necessary that the matter be referred to the Collector for consideration on this count.
6. Such reconsideration may not be limited to the issue of classification only. The assessees have claimed the benefit of Notification No. 35/84-C.E., as amended. This Notification prescribed the rate of 2 per cent of additional duty of excise on MMF containing less than 7 per cent by weight of polyester fibre. The Collector has rejected this claim on the grounds that the construction of the fabrics was not declared to the department and also that the manufacturer had been suppressed. Neither reasoning is capable of denying the benefit of this Notification. The SASMIRA report shows that the polyester content was less than 7 per cent. This aspect also will have to be considered by the Collector.
7. Therefore, while up-holding the Collector's order that the processes undertaken by the appellants amounted to manufacture, we remit proceedings back to the jurisdictional Collector for re determination of the amount payable by first examining the submissions and the evidence as to classification and secondly by extending the benefit of Notification No. 35/84-C.E. if available. The Collector would be free to re-determine the quantum of penalty after these calculations. The orders of confiscation of land, building, etc. are upheld. The appeal is decided in these terms.