Full Judgment
Notification 80/76 is reproduced below before its amendment: "In exercise of the powers conferred by sub rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts cotton fabrics, falling under sub-item 1 (2) of Item No 19 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), when subjected to the finishing processes specified in column (2) of the Table hereto annexed, from the whole of the entry in duty of excise leviable thereon subject to the conditions laid down in the corresponding column (3) of the said Table.-------------------------------------------------------------------------------- THE TABLE--------------------------------------------------------------------------------S. No Description Conditions--------------------------------------------------------------------------------(1) (2) (3)--------------------------------------------------------------------------------1.(a) Bleaching without the aid of Provided that the fabrics so power or steam, including bleached, dyed or printed - manual bleaching in open--------------------------------------------------------------------------------(b) Dyeing without the aid of (i) has not been stentered on a power or steam, including stentering machine.
dyeing with jiggers operate--------------------------------------------------------------------------------(c) Printing without the aid of (ii) is not subjected to any fur- power or steam but exclud ther process when conducted ing printing with more than with the aid of power or steam,7.
Singeing, that is to say, burning away of knot and 2. Notification 120/76 was identically worded except that it granted exemption, not to the basic duty but the additional duty of excise leviable under the Additional Duties of Excise (Goods of Special Importance) Act, 1957. Both these notifications were amended on 24-11-1979, by the addition of the following proviso: (i) if unprocessed cotton fabrics falling under sub-item 1(a) of the said Item No 11 on which the duty of excise is leviable either in whole or in part, are subjected to any process or processes specified in the said Table, within the factory in which the said unprocessed fabrics have been produced; or (ii) if cotton fabrics falling under sub-item 1 of the said Item No. 19 are subjected to any process or processes specified in the said Table within the same factory in which they have been subjected to any process, other then the processes specified in the Table." 3. We are not concerned with the first clause of this amendment. It would apply in a situation where the cotton fabrics is processed in the same factory where unprocessed fabric is produced and is not relevant to the facts before us. The second proviso is relevant. The notice alleges and the Commissioner accepts, that the following processes took place in the units specified.
4. It was the case of the department that the seven units were in fact one factory. They were under the same roof except for singeing, scouring and hydro extraction. They were located in the same address, 202 GIDC Vapi and enquiry showed that these were in fact owned by the same set of persons. Statements of the purported owners of these units state that they were none other than labourers or employees of Ramprakash Podar. The Commissioner in short concludes that all these activities took place in one factory. Therefore, the condition in Clause (ii) in the proviso inserted into this notification by amendment on 24-11-1979 was attracted. In the same factory, processes other than those exempted processes took place. Hence the benefit of the notification will not apply.
5. It is further contended that even on the assumption that they are the same factory any other processes referred to in the proviso to the notification has to be processes akin to the processes specified in the Table to the notification. The processes on account of which the benefit has been denied are not so akin. Therefore, the benefit of the notification cannot be denied.
6. The argument of the advocate first aimed on the Collector's conclusion that all the units were in fact one factory. It is contended that each of the units had a separate existence in identity, they came into existence on a different time by one set of people and it has not been shown that they were all owned by Podar. Therefore, it was contended that the disqualification resulting from the operation of the proviso (which is added by the amendment made in 1979) would not apply.
The dutiable process, was calendering with the aid of power. This was done in the premises of Natwar Textile Processing Pvt. Ltd. other processes done elsewhere. The exemption available to the calendering therefore would not be affected by the introduction of the proviso.
7. The departmental representative lays considerable reliance on the evidence that the Commissioner has cited, as a result of introduction of the purported owners of the factory, and that the machinery in question was owned by Podar (who was the owner of Natwar Textiles) and otherwise supported the Commissioner's finding, with regard to the identity of the units being one.
8. In our opinion, the appeal can be disposed of on the alternative argument advanced by the advocate for the appellant, on the assumption that the ownership was in fact one, without going into the correctness of this point. This argument runs as follows. All the processes in question undertaken in the factory (assuming it to be one) are without the aid of power, except calendering. All these processes are exempted from duty by notification 137/77. This notification, dated 18-6-1977 exempts from the basic duty and the additional duty on cotton fabric when processed without the aid of power or steam. The only process which is not covered by this exemption, for the reason that it was carried out with the aid of power, is calendering. Calendering with the aid of plain rolling has been held not to be a process of manufacture by the Supreme Court in Mafatlal Spinning & Weaving Mills v. CCE -1989 (40) E.L.T. 218. The Supreme Court also accepted, after considering the process that calendering plain rollers was a temporary process, giving the calendered fabrics smooth and lusturous surface. This is done by flatening the round yarn which composed the fabric, so that they reflect a greater amount of light. However, this finishing is temporary. The yarn reverts to its round shape on steaming, or laundering. This ratio has been followed by the Tribunal in Sidheshwari Cotton Fabrics v. CCE - 1989 (44) E.L.T. 157. These decisions had not been rendered when the matter was before the Commissioner and therefore could not be cited before him.
9. It will then follow that the benefit of notifications would continue to be available, if the processes which were undertaken without the aid of power. The calendaring undertaken by the appellant with the aid of power would not render the goods dutiable. No duty therefore could be demanded on this score.
10. The next question is the applicability of notification 130/82 after its amendment. The notification initially exempted cotton fabrics processed without the aid of power or steam from whole of the basic and additional duty. The proviso to the notification precluded its operation to cotton fabrics which were subjected to the process of bleaching, dyeing or printing subject to the condition relating to the quantity of fabrics bleached or dyed. This notification was amended with effect from 18-6-1982. The amendment inter alia inserted an Explanation to the notification, which provided that bleaching with the aid of machines would include keiring operations. The department consequently demanded duty from the appellant for the clearances henceforth for the reason that keiring operations were going in M/s.
Super Bleaching Works, one of the units on which was proposed in the notice to be part of the same factory. The contention of the appellant is that prior to the year 1986-89 on which this question was amended Super Bleaching Works was no longer carrying out any kering (sic) operations. The keiring boilers installed in this unit had been dismantled by this time were no longer in operation. The basis for this claim is the statement of KI Vyas dated 21-4-1983, manager of Natwar Textile Processors Pvt. Ltd. had said in his statement that although there were seven keirs installed in Super Bleaching Works, the keiring operation was stopped from 3-4-1982, whereafter the firms switched over to a process of cold bleach. He said that the seven keirs were dismantled and kept out of use till 7-8-1982. They were thereafter "scrapped out". This statement was recorded considerable period before the issue of the show cause notice on 28-12-1983. There is no material advanced in the show cause notice, or reflected in the order of the Collector, on the basis of which it can be said that keiring operations took place in any of the seven units which the notice alleged constitute the single factory. There is therefore no rebuttal to the statement of Vyas and in any case, there is no material on the basis of which it can be said that keiring operations took place. The demand of duty by invoking notification 130/82 after its amendment therefore cannot be sustained.
11. We have in the earlier paragraph referred to the seven units which the notice alleged to constitute a single factory under or operated by a single group. We have, earlier in paragraph 4 specified the seven units in question. The Collector however refers to an eighth factory M/s. Navneet Manufacturing Company. In paragraph 34 of his order he finds that this unit was engaged in singeing, scouring and hydro extraction. In paragraph 37 he says that this unit had claimed exemption from duty payable on account of singeing and hydro extraction with the aid of power and kiering and scouring without the aid of power. The show cause notice does not seek to include this unit as constituting one of the elements in M/s. Natwar Textile Processors Pvt.
Ltd. The notice in paragraph 2 refers to the details collected by each of the seven units that we have referred to earlier. It also goes on to say that besides the above seven units, the officers noticed that M/s.
Navneet Manufacturing Company was situated in the same compound, was a proprietory concern of "N Podar" and engaged in singeing, kiering, scouring and hydro extraction. The notice thereafter gives the details obtained from persons purportedly in charge of all the units, except Navneet Manufacturing Company, as a basis for alleging that these units were part of Natwar Textile Processors Pvt. Ltd. It refers to enquiries with the banks account with regard to the six units, summons issued to various persons in these six units etc. Paragraph 15 of the notice, the allegation is that the six proprietory concerns in which Navneet Manufacturing Company, is not included, a paper creation of Natwar Textile Processors Pvt. Ltd. 12. The omission of Navneet Manufacturing Company, both from the narration with regard to enquiries and more critically from the specific charge is significant. From the absence of its name in the specific charge, it would follow that there was no proposal to treat it as part of Natwar Textile Processors Pvt. Ltd. The processes in that factory and clearances from it therefore could not be considered to be part of the processes and clearances of Natwar Textile Processors Pvt.
Ltd. That this omission is not accidental or a slip is clear from the preceding parts of the notice. After observing that this unit was in the same premises, the officers have chosen not to enquire into its ownership etc. The conclusion therefore is that there was no intention to include this unit a., being part of Navneet Manufacturing Co. In any event, whatever be the intention, there has, as we have seen, been no inclusion in the specific charge.
13. The Collector's order demanding duty on fabrics cleared from this unit or denying any benefit of exemption to it is therefore clearly outside the scope of the notice and cannot be upheld.14. The conclusion that follows from this discussion is that the benefit of the notification could not have been denied to these units and therefore, to M/s. Natwar Textile Processors Pvt. Ltd. on the assumption that these units comprised part of this company. In view of this, we have not considered necessary to record in detail or dealt with the arguments raised by both sides as to whether these units were or were not part of M/s. Natwar Textile Processors Pvt. Ltd. 15. Penalty is also not imposable on M/s. Natwar Textile Processors Pvt. Ltd. 16. Accordingly, the appeal is allowed and the impugned order set aside.