Full Judgment
It was also alleged that Poly Vinyl Alcohol (PVA) used in the manufacture of 100% Grey Cotton Fabrics is a raw material and not a consumable and value is required to be added in the value of the assessable value. However, this was disputed by the assessee on the ground that PVA is used as a sizing chemical and not a raw material and the same is a consumable and therefore, its value is not required to be added in the value of the assessable value. The Commissioner after due consideration of the entire evidence on records and the process of manufacture accepted the assessee's plea that PVA is used as a sizing agent and it is not a raw material and its value is not required to be added in the assessable value. The Revenue is aggrieved with this finding.
2. The Commissioner had also confirmed demands under Section 11A(1) of Central Excise Act. The assessee had challenged the confirmation of demands before the Tribunal and the Tribunal by Final Order No.1461/2003 dated 14.11.2003 remanded the matter for denovo consideration. The Revenue in this appeal contends that the Commissioner was not justified in dropping the demands and for considering the PVA as not a raw material but a consumable. He has taken several grounds in the matter.
4. The learned Counsel brings to our notice the Final Order No. 2073 & 2074/2005 dated 1.12.2005 rendered in the case of Maruti Cottex Ltd. v.CCE, Hyderabad on this very issue, the Tribunal after due consideration has considered PVA as a sizing material and not a raw material and the demands were dropped. The learned Counsel submits that the ratio of the cited judgment clearly applies to the facts of the case and hence, the appeal is required to be rejected.
5. On a careful consideration, we notice that the Commissioner after due consideration accepted the assessee's plea that PVA is a sizing material and consumable and not a raw material. This is challenged by Revenue in the present case. The assessee has relied on the ratio of this Bench's judgment rendered in the case of Maruti Cottex Ltd. v. CCE - Final Order No. 2073-2074/2005 dated 1.12.2005. We have perused the findings rendered in this case. The Tribunal has clearly held that PVA is used in the process as sizing agent. The findings recorded in 4 and 5 are reproduced herein below.
4. On a careful consideration of the submissions made in the light the technical literature and extracts from various dictionaries, it is clear that the item PVA 117 is used in the process of sizing as a consumable. The said material is washed off before the yarn is used for weaving. To be a raw material, the used material should remain as an input in the final product. Learned SDR relied on the ruling rendered in the case of CCE, Guntur v. Asia Peroxide Ltd., (Final Order No 422-42312004 dated 4.2.04). In this case, the items used in the course of manufacture were several and all of them had been imported and they had not been consumed as consumables but had been used as raw materials. Hence this judgment is clearly distinguishable. The other judgment relied by learned DR is in the case of CCE v. Century Denim Jri-Del wherein imported indigo pyre dye, fixing agents, woven interlining, thread, twill tape, buttons, stickers etc., were imported and used as raw materials. The same remained in the final product and were not consumables. Hence, this judgment is also clearly distinguishable: The Tribunal in the case of CCE v. Ashima Fabrics (supra) has clearly held that PVA 1.17 used for making sizing, mixture cannot be considered as raw material and the finding recorded by the Commissioner that PVA is consumable goods was required to be upheld in the light of the materials and technical literature relied by the Commissioner. On our independent examination also, we have clearly seen from the technical literature produced that the item PVA is not a raw material but it is a consumable. The Encyclopedia of Textile Finishing at page 1683 also clearly spells out that the Poly Vinyl Alcohol dispersions is significantly decreased by heating treatment above 120 C application particularly for sizes, finishes etc., The definition of sizing in Sevak's Dictionary of Textiles at Page 505 also shows that sizing is an operation carried out on warp yarn before weaving to increase the weaving efficiency by reducing the yarn breakage during weaving. It states that this is done by preventing the surface-protruding fibres of yarn. For this purpose, the fibres extending along the yarn surface are coated with a thin layer of starch, tallow, china clay etc. It is carried out by immersing the yarn for a few seconds in a hot mixture pf an adhesive (starch, carboxy methyl cellulose, polyvinyl alcohol etc.,) A lubricant and softner C tallow, emulsified vegetable oils and their solubilised products), a preservative (perttachloropheriol, sodium silicofluoride etc.). The yarns are then squeezed and dried.
5. Hon'ble Gujarat High Court in the case of Arvind Mills Ltd. v. UOI (supra) has held that sizing is necessary for weaving purposes after the yarn is completely manufactured. It has held that sizing process is carried out to add some strength to the yarn to withstand stress and strain of weaving. The sizing so added is removed completely after weaving and bleaching process to make the fibre suitable for dyeing, printing etc. This bench in the case of Forbes Gokak Ltd., (supra) has held that application of wax on the fibre is used as a consumable and not as raw material. In view of the material placed before Us, the contention of the appellant that PVA is not used as a raw material is required to be upheld. The appellants are entitled to the concessional benefit of the Notification in question. Further more, the appellant had declared that they were using the material with full knowledge of the Department. Hence there is no suppression of facts for invoking larger period. The appeal is allowed both on merits as well as on time bar with consequential relief if any.
Respectfully following the ratio of the above noted orders, we find that the finding recorded by the Commissioner is just and proper in law. Hence, there is no merit in this appeal and the same is rejected.
(Operative portion of this Order was pronounced in open court on conclusion of hearing)