Judgment:
1. This Is an appeal directed against Order-in-Appeal No.E.2095/BII-410/83, dated 10-11 -1983 passed by the Collector of Central Excise (Appeals), Bombay.
2. This case has had a chequered history. M/s. Amaratara Industries (hereinafter referred to as the respondents) manufactured "Waterproof cloth adhesive tapes" falling under Item No. 60 of the First Schedule ('CET' for short) to the Central Excises and Salt Act, 1944. The manufacturing process is as follows :- "Medium bleached duty paid cloth is the base material for the manufacture of "Wareproof cloth adhesive tapes".
The above-said cloth which is in roll form is mounted on the coating machine and release coating is done on one side while the cloth is moving simultaneously through the drying chamber and getting rolled at the other end in the course of a continuous integrated process.
The coated roll comes back to the feeding end again and adhesive mass Is applied evently on the reverse side which again after passing through the drying chamber is spread over In big iron round frames and left there to settle for 24 hours. Immediately after completion of the settling time, the same is put on the slitting machine and silt to required sizes of tapes which automatically get wound on different sizes of spools." The excise authorities considered that the roll of cloth coated on one side with plastic material answered to the description of cotton fabrics impregnated with plastic material which fell under Item No. 19 III, CET. On this basis the respondents were asked by the Assistant Collector on 10-4-1975 to pay duty on the waterproof cloth and to apply for L4 licence. In appeal, the Appellate Collector of Central Excise by order dated 9-2-1976 remanded the matter to the Assistant Collector for passing an appealable order. After adjudication, the Assistant Collector passed an order on 9-11-1976 ordering the respondents to pay duty under Item No. 19 III, CET. In appeal, the Appellate Collector of Central Excise, by order dated 9-12-1976, again set aside the Assistant Collector's order and remanded the matter to the Assistant Collector for de novo adjudication after taking into consideration the trade opinion, technical opinion and the chemical test report on the goods.
As a result of de novo adjudication, the Assistant Collector passed an order on 16-8-1983, again holding that the waterproof cloth manufactured by the respondents was classifiable under Item No. 19 III, GET with effect from 1-10-1975 and directing them to pay duty at the appropriate rate from 1-10-1975 onwards. The respondents challenged this order before the Collector of Central Excise (Appeals) who, by his order dated 10-11 -1983, found in favour of the respondents and held that no goods falling under Item No. 19 1(b) or 19 III came into existence at the intermediate stage and that the process of applying release coating on one side did not make the cloth waterproof doth or impregnated cloth. It is against this order that the Collector of Central Excise, Bombay-ll, has filed the present appeal.
3. We have heard Shri L.C. Chakraborty, DR, for the appellant-Collector and Shrl Haresh Jagtiant, advocate, with,Shri L.P. Daulat, advocate, for the respondents.
4. The Issue which arises for consideration is whether the rolls of cloth with release coating on one side, which Is an Intermediate product In the manufacture of waterproof cloth adhesive tapes, were excisable goods at the material time and, if so, were they classifiable under Item No. 19 1(b) or 19 III of the CET.5. Shri Chakraborty submitted that the above goods being waterproof doth impregnated with plastic materials, fell under Item No. 19 III. He stated that it was not quite dear whether the process of manufacture was a continuous or discontinuous one but that, in any event, the aforesaid intermediate goods were excisable.
6. Shri Haresh Jagtianl, counsel for the respondents, stated that It might be assumed that the process of manufacture was discontinuous and, even on that basis, the respondents had a good case. The real question according to him was whether the intermediate product was a marketable commodity or not. He submitted that it was not and drew our attention to the expert opinion and trade opinion, which were submitted before the lower authorities and which, were submitted before the lower authorities and which, in spite of the clear directions of the Appellate Collector, had not been considered by the Assistant Collector. These opinions have not been challenged or rebutted by the department. The counsel also cited a few authorities in support of his contention that affidavits filed before adjudicating authorities as evidence could not be arbitrarily rejected. He also cited authorities to show that If goods were not marketable, they would not be chargeable to excise duty.
' 7. We have considered the submissions of both sides. The respondents had produced before the lower authorities affidavits from two experts and opinions from 2 members of the trading community. The first affidavit is by Shri Kiran Malhotra who is highly qualified technically and has considerable experience in the manufacture of adhesive and other tapes. He deposes that the process of manufacture of the subject adhesive tapes is a continuous one starting from the waterproofing release coating of the base doth on one side and coating the other side with adhesive mass and slitting the same into the required sizes of tapes, the end product. The waterproofing process Is applied to one side of the cloth in order to give release coat to the back side of the tape so that when the tape is wound into a spool, the adhesive coat may not transfer to the other side. It also stops the oozing of the adhesive mass through the doth. The waterproofing process adopted does not make the cloth waterproof for commercial use as waterproof doth. It Is neither impregnation nor coating nor lamination. If cloth is given only the release coating and not the adhesive base coating the cloth tapes cannot be sold for any purpose and is not at all marketable. It cannot be used for the manufacture of rain coats, tarpaulins, tents and umbrellas. The doth with only the release coating is only an intermediate product and not the final product and is not recognised by the market for the purpose of manufacture of rain coats, umbrellas etc.
The process adopted does not give waterproofing properties to the cloth as required for commercial marketing of the material as waterproof doth and brings about a stiffness and release properties which are totally unsuited for marketable waterproof use. The second affidavit is that of Dr. Sarajit Basu, Assistant Professor, Indian Institute of Technology, Bombay, who supports the technical points made in Shri Kiran Malhotra's affidavit. He further states that any moisture resistant properties imparted to the cloth by the release coating are only incidental. The main purpose of the release coat is to facilitate unwinding of the tape during use. He has concluded that the release coat cloth cannot as such be marketed as waterproof cloth for the purpose of making rain coats, umbrellas and other similar goods. Next, we have a letter dated 9-1-1977 from Apurva Textiles, dealers in Art Silk and Synthetic Fabrics at Bombay. They say that the sample of the respondents' goods was not marketable and, in support of this, have enclosed a letter dated 6-1-1977 from S. Ghanshyam Das, Interlining doth Merchants, stating that the cloth was not at all marketable. Lastly, we have a letter dated 11-1-1977 from Rungtas Private Limited, wholesalers in Bhor Embossed and Plain Binding doth at Bombay stating that there is no market for the release coating doth.
8. In the order passed by the Assistant Collector on 19-8-1983, there is no reference to any material placed before him by the department to controvert the aforesaid evidence produced by the respondents. However, the Assistant Collector has airily disposed of the contention of the respondents by stating inter alia that even a school boy can identify the release cloth as waterproof cloth by mere visual inspection. He further states that in case the said waterproof cloth was not manufactured in the respondents' factory, then they would have bought the same from outside. There is, therefore, no reason why the waterproof cloth manufactured by the respondents cannot be bought and sold if offered for sale to right users as raw material. The waterproof cloth in the present case is not sold because the respondents manufacture the same for captive use. If the goods were to be in the market, any-manufacturer of adhesive tapes falling under Item No. 60, CET would certainly buy the same. To put it mildly, we consider that this Is a strange, almost perverse, way of dealing with the affidavits containing expert opinion and letters containing trade opinion in the absence of any material from the department's side in rebuttal thereof.
Criticising the observations of the Assistant Collector, the Collector (Appeals) has, rightly, in our opinion, stated that such presumptions and assumptions do not prove the case.
9. In the above context, we may usefully refer to some of the authorities cited by the counsel for the respondents. In Union of India and Ors. v. Delhi Cloth and General Mills Company Ltd. and Ors. -1977 ELT (J 199) the Supreme Court has, after referring to the meaning of the word "goods" in dictionaries and other works, observed in para 17 of Its judgment that to become "goods", an article must be some thing which can ordinarily come to the market to be bought and sold. The same view was followed by the Supreme Court in South Bihar Sugar Mills Ltd. and Anr. etc. v. Union of India and Anr. etc. -1978 ELT (J 336). The manner of dealing with affidavits has been spelt out at some length by the Bombay High Court in its judgment in the case of Subhash Chandarnishat v. Union of India and Anr. -1979 ELT (J 212). At page J 223 of the report, the High Court relied on the observations of the Supreme Court in para 13 of the report of the Supreme Court's judgment in M. Parikh and Co. v. Income-tax Commissioner - AIR 1956 S.C. 554, which clearly suggest that where affidavits are filed before an officer, normally speaking, if he desires to challenge the correctness of the averments made in these affidavits, he should call the deponents for being cross-examined or test the correctness of the averments by any other means open to him and it would not be proper for the officer to arbitrarily reject these affidavits as incorrect. The method followed by the Assistant Collector in dealing with the experts' affidavits and trade opinions is clearly contrary to these observations. He has summarily rejected them and based his conclusion not on any material to the contrary but on his own subjective opinion without disclosing any basis therefor.
10. In the above state of evidence, we have no hesitation in holding that the rolls of doth subjected to the process of release coating with plastic materials on one side did not fall under either Item 19 1(b) or Item 19 III of the CET. In fact, the goods not being marketable were not liable to be charged to any excise duty. In this view of the matter, we uphold the impugned order and dismiss this appeal.