Judgment:
1. The officers of Central Excise Preventive, Amritsar, visited the factory premises of M/s. Wooltex Industries, Amritsar on 25-1-1998 and found that they were engaged in the printing of grey fabrics with the aid of power and steam on job work basis. The unit was found working and the party was doing printing on man-made fabrics. Shri Satnam Singh, partner of the appellants-firm informed the visiting officers that there's is a partnership firm and they had installed the machinery for printing the fabrics; that they were receiving grey man-made fabrics from the traders and after doing printing, the same were dispatched in the running lengths to the traders under the cover of invoices/challans. The visiting officers seized 270 metres valued at Rs. 4,950/- of finished printed fabrics lying in the unit and the proceedings were initiated against them. They were issued a show cause notice dated 20-7-1998 by the Deputy Commissioner of Central Excise, Amritsar in which they were called upon to show cause why the central excise duty amounting to Rs. 3,68,9207- on the man-made fabrics valued at Rs. 23,63,529/- clandestinely removed by them during the period from 23-2-1995 to 25-1-1998 and of Rs. 990/- leviable on the seized man-made fabrics should not be recovered from them under Rule 9(2) of Central Excise Rules, 1944 read with Section 11A(1) of Central Excise Act, 1944. They were also called upon to show why 270 metres of man-made fabrics valued at Rs. 4,950/- seized on 25-1-1998 from their unit should not be confiscated under Rule 173Q, why a penalty should not be imposed on them under Section 11AC read with Rules 9(1), 173Q and 226 of Central Excise Rules, 1944 and why the interest should not be charged from them under Section 11AB of Central Excise Act, 1944. Shri Satnam Singh, partner of the firm was also called upon to show cause why a penalty should not be imposed on him under Rule 209A of Central Excise Rules, 1944.
2. The party replied to the show cause notice. The submissions made by them before the adjudicating authority are paraphrased as follows in the Order dated 9-1-2000 passed by the Joint Commissioner of Central Excise, Chandigarh-II :- "In reply to the SCN, the noticee vide their letter dt. 29-9-1998 submitted that they have been engaged in the manufacture of Scarves classifiable under sub-heading No. 6202.00 of Central Excise Tariff and chargeable to 'Nil' rate of duty. They denied the contravention of any of the provisions alleged in the show cause notice and held the seizure as unjustified and uncalled for. The noticee also submitted that they were engaged in the manufacture of scarves out of man-made fabrics on job work basis. Their Customers had purchased the duty paid fabrics from the market for getting the process of printing on it and after printing 32 pieces of the scarves in a single length of fabrics come into existence. They further stated that these scarves emerged in uncut stage with clearly demarcated dividing lines during the process of printing and then these scarves were cut along the dividing line into individual scarves which were hammed by means of sewing machines. It was further submitted that the uncut scarves were not marketable as printed fabric in the market and on the bills, they had written the number of scarves only. Finally the no-ticee requested to grant them personal hearing before the case is adjudicated." 3. Consequently, the Joint Commissioner confirmed'the demand of Rs. 3,68,020/- on the party under Rule 9(2) read with Section 11A of Central Excise Act, 1544. He further ordered for confiscation of 270 metres of the seized man-made fabrics valued at Rs. 4,950/- but however, gave an option to the party to redeem the same on payment of a fine of Rs. 500/-. He also imposed a penalty of Rs. 3,69,020/- on the party under Section 11AC of Central Excise Act, 1944 read with Rules 9(2), 173Q and 226 of Central Excise Rules, 1944. He further directed the party to pay the interest on the confirmed demand as provided under Section 11AB of Central Excise Act, 1944. Though Shri Satnam Singh, partner of the firm was also put on notice for the imposition of penalty under Rule 209A, the Joint Commissioner however has passed no order against him.
4. M/s. Wooltex Industries filed an appeal before the Commissioner (Appeals). The Commissioner (Appeals) in his order dated 21-6-2001 has allowed the appeal of the party in following terms :- "On going through the impugrted order, I observe that the contention of the appellant, that they had printed scarves with clearly demarcated dividing lines on the running length of grey fabrics, has not been disputed by the lower adjudicating authority. It is also not been disputed that merely by cutting along the dividing line the individual scarves are obtained which require only hemming of the edges. Further, the argument of the appellant that the goods, in question, cannot be used as dress material or for any other purpose other than scarves, has also not been negated by the lower adjudicating authority. Under the circumstances, it looks, apparently, clear that the appellants had printed scarves though on the running length of grey fabrics. I am of the view that once the scarves on the printed fabrics are clearly identifiable as discussed above, the printed fabrics can only be used as scarves by cutting along side the dividing line. I have perused section notes 5(b) and 5(c) of Section XI, as referred to by the appellant with reference to the definition of 'made-up' article. As per Section Note 5(b), the separation of the product ready for use is by cutting the dividing threads but in the instant case it is by cutting the clearly demarcated line separating one scarf from the other.
Further, the printed fabrics were cleared and used as scarves. No, evidence contrary to this contention of the appellant has been placed on record by the deptt." "In view of the foregoing, I find considerable force in the argument of the appellant that they had done the process of printing of scarves which are chargeable to nil rate of duty under Heading 62.02 of the Central Excise Tariff. Accordingly, I allow the appeal." 5. This is a Revenue appeal against the impugned order of the Commissioner (Appeals). We have heard Shri Atul Dikshit, SDR, for the Revenue. The respondents are not represented. The matter was last called before the Bench on 29-5-2002 and stood adjourned to this date at the request of Shri K.K. Anand, Advocate, for the respondents. Today when the matter is called, the respondents are not represented. There is also no communication from them either requesting for an adjournment or giving the reason for their absence. We, therefore, proceed to decide the case on the basis of the evidence available on records and the submissions made by the ld. SDK for the appellant. The ld. SDR appearing for the appellant does not contest the proposition that if the goods produced by the respondents are placed under Tariff Heading 6202.00 as 'made-up articles' the same would be subject to 'nil' rate of duty. On specific query from the Bench that even if the contention of the Revenue is accepted that the goods are not to be classified under Heading 6202.00 and subjected to nil rate of duty - as held by the lower appellate authority - under which heading of the Tariff Schedule the Revenue seeks to place the goods manufactured by the respondents, the ld. SDR was not able to give any reply. It is observed that neither in the show cause notice dated 20-7-1998 issued in these proceedings nor in the present appeal filed by the Revenue, it is stated as to under which heading the goods are sought to be classified and at what rate they are liable to be charged to duty. In the absence of any such averment either in the show cause notice or in the present appeal filed by the Revenue, we are of the view that the demand of duty sought to be recovered from the respondents is entirely misplaced and the proceedings are ab initio non est. This appeal is thus without any merit and the same is accordingly dismissed.