1. The facts of this case do not need to be set out in detail for disposal of the present appeal. The appellants were charged by the Central Excise authorities with violation of several provisions of Central Excise law inasmuch as they had manufactured and cleared a quantity of calendered cotton fabrics falling under Item No. 19I(b) of the First Schedule ("CET") to the Central Excises & Salt Act during the period from 14-5-1981 to 19-9-1981 without obtaining a Central Excise Licence, without maintaining statutory records, without submission of price list/classification list, without observing Central Excise formalities and without payment of Central Excise duty leviable thereon amounting to Rs. 2,62,767.04. The Collector of Central Excise, Calcutta, in due course, adjudicated the case and directed the appellants to pay the aforesaid sum of duty besides imposing a penalty of Rs. one lakh on them under Rule 173Q of the Central Excise Rules. In appeal, the Central Board of Excise and Customs confirmed the duty demand but set aside the penalty. The appeal against this order was dismissed by the Tribunal by order dated 16-3-1984 reported in 1984 (18) E.L.T. 297. The Tribunal held that calendering was a process of "manufacture" within the meaning of Section 2(f) of the Central Excises & Salt Act and that calendered fabrics fell within Item 191 of the CET.In coming to this conclusion, the Tribunal had taken the view that the words "any other process" in Section 2(f)(v) of the Act and Item 19I(b) of the CET were not Ejusdem Generis with the preceding specified processes of "bleaching, mercerising, dyeing, printing, waterproofing, rubberising, shrink-proofing, organdie processing".
2. The Tribunal's order was challenged by the appellants in a statutory appeal under Section 35-L of the Act before the Supreme Court. The Court, by its judgment dated 17-1-1989 since reported in, set aside the Tribunal's order and remitted the appeal before the Tribunal to it for fresh disposal in accordance with law. In this judgment, the Court held that "any other process" in Section 2(f)(v) of the Act [and in Item 19I(b) of the CET], though otherwise of wide import, must share the characteristics of and be limited by the preceding expressions. In the present case, the expressions "bleaching, mercerising, dyeing, printing, water-proofing, rubberising, shrink-proofing, organdie-processing" which precede the expression "or any other process" contemplate processes which impart a change of a lasting character to the fabric by either the addition of some "chemical into the fabric or otherwise. "Any other process" in the section, the Court observed, must share one or more of these incidents. The expression "any other process" is used in the context of what constitutes 'manufacture' in its extended meaning and the expression "unprocessed" in the exemption notification (230/77-C.E., dated 15-7-1977 and 231/77-C.E., dated 15-7-1977) draws its meaning from that context. It was contended before the Court that the process of plain-calendering neither added anything to the cotton fabric nor was the effect brought about by it lasting. It was nothing more than pressing the cotton fabric by running it between plain rollers to improve its appearance.
It was purely a temporary finish and did not impart to the fabric either of the two ingredients necessary to bring the process into the family of processes envisaged by the preceding expressions in the section. However, the Court considered it proper to remit the matter to the Tribunal to consider whether the particular process of calendering adopted by the appellants would satisfy the test laid down by the Court in the matter of construing the expression "any other process".
3. Though an application was filed by the appellants for admission of additional evidence in the shape of an affidavit, Shri Rangaswamy, Counsel for the appellants, did not press the same.
4. The Learned Counsel submitted that though in the present case, the Supreme Court had remitted the appeal to the Tribunal for de novo consideration, the Court had held in the case of Mafatlal Fine Spinning & Manufacturing Co. Ltd. v. Collector of Central Excise - 1989 (40) E.L.T. 218 (SC) that plain-roller calendering was not a process of "manufacture". The ratio squarely applied to the facts of the present case. The contention that the process in the present case was plain-roller calendering had not been controverted by the Department.
In denying exemption under Notification No. 80/76-C.E., dated 15-3-1986, the Collector could have done so only by recording a finding (which he had not) that the process employed was not plain - but grooved - roller calendering.
5. In reply, the Learned D.R., submitted that there was no information on record as to actual process employed by the appellants. He referred to certain technical authorities ("Encyclopaedia of Textiles", 3rd Edition), by the Editors of American Fabrics and Fashions Magazines and "Textiles Fibre to fabric" by Corbman on Calendering. In Verma Industrials Ltd., Bangalore v. Collector of Central Excise, Bangalore -1984 (18) E.L.T. 403 (Tribunal), the Tribunal had held katcha dying to be a process of manufacture. In Empire Industries Ltd. and Ors. v.Union of India and Ors. -1985 (20) E.L.T. 179 and Ujagar Prints, etc.
etc. v. Union of India and Ors. -1988 (38) E.L.T. 535, the Supreme Court had not distinguished between permanent and non-permanent processes. He concluded by submitting that even if the process was plain-roller calendering, it would render the fabric dutiable.
6. In a brief rejoinder, the Counsel for the appellants submitted that the Tribunal's decision in the Verma Industrials case (supra) dealt with dyeing and was not relevant. In the Empire Industries case (supra) before the Supreme Court, the question of permanent and non-permanent processes did not arise, whereas it did arise in the present case. The Court's judgment in the Mafatlal Fine Spinning & Mfg. Co. Ltd.'s case (supra) had settled the issue.
7. We have carefully considered the submissions of both sides. We note from the Collector's order in original dated 8-1-1982 that as early as on 8-12-1981, in their reply to the show cause notice, the appellants had urged inter alia that ordinary calendering (without grooved rollers) was not a process amounting to manufacture so as to attract duty liability under Item No. 19I(b), CET. Of course, the Collector did not accept the contention that ordinary calendering was not a process of "manufacture". It is also seen from para 27 of the Board's order-in-appeal dated 28-4-1982 that the appellants had a Central Excise licence for over 20 years and that they had pleaded that the calendering machines were in existence in their premises right from the date of the original grant of the licence in the fifties and further that they had shown the calendering machines in the ground plan submitted by them. In para 28 of the order, the Board had noted that these contentions had not been disproved. In the circumstances, it is reasonable to proceed on the footing that the appellants had plain and not grooved roller calendering machines. As Shri Rangaswamy correctly pointed out, the Department could have, but did not, investigate further into the matter at the material time. We do not think it is necessary to launch on a factual investigation, as the D.R. would have us do, on the aspect at this distant date.
8. In para 9 of the Tribunal's order No. C151 & 152/84 dated 16-3-1984, relevant extracts from "Modern Textiles" by Dorothy S. Lyle (John Wilay & Sons, N. York), Chamber's "Dictionary of Science & Technology", "Encyclopaedia Britannica" and "Textile Terms and Definitions" (Manchester Textile Institute) had been reproduced. From these extracts, it is evident that calendering is simply ironing of fabric by passing it between the heated cylinders of a calendering machine. The process gives the fabric a smooth and lustrous surface. The round yarns are flattened, hence reflect more light. But the yarns revert to their round shape with steaming, laundering, and dry cleaning. Hence, calendering gives only a temporary finish to the fabric (- "Modern Textiles"). Calendering is not usually a permanent process (-----"Encyclopaedia Britannica"). (The technical authorities relied upon by the D.R. also say that calendering is essentially a process of ironing). We may note that the authorities also refer to calendering machines with engraved bowls or rollers which impart patterns in relief or embossed designs to the fabric. There is no allegation in the present case that the appellants' calendering machine was one such. On the other hand, it was, on the material available, a plain roller calendering machine. Therefore, the effect imparted to the fabric by the machine could not have been of a lasting nature. Nor is there any material on record to show that any chemicals were added to the fabric in the processes employed by the appellants. Thus, by applying the test laid down by the Supreme Court in its judgment dated 17-1-1989, we conclude that the process of calendering applied to cotton fabrics by the appellants did not amount to "any other process" referred to in Section 2(f)(v) of the Act and Item No. 19I(b) of the CET.In Mafatlal Fine Spinning & Manufacturing Co. Ltd. v. Collector of Central Excise 1989 (40) E.L.T. 218 (SC), the question arose whether cotton fabrics which underwent the process of calendering and steaming ceased to be "grey" fabrics or became "processed" fabrics. Of course, the dispute was in the context of the Central Excise Rules 48A(2) which provided for different rates of interest on the deferred yarn duty depending on whether the fabrics cleared were "grey" or "processed".
But, in our view, the principle of the Supreme Court's decision is relevant for our present purpose because the question before the Court was, as in the instant case, whether the process of "calendering" was "any other process" amounting to "manufacture" Calendering, the Court noted, was indisputably a finishing process. The Tribunal had relied on its views in the case of Mis. Siddeshwari Cotton Mills (the order which was challenged before, and was set aside in appeal, by the Supreme Court which has lead to the present proceedings). It was submitted on behalf of Mafatlal Mills before the Supreme Court that the process of calendering was not done by "grooved" rollers or cylinders but only by plain rollers. The Court noted that the appellants' claim before the authorities that the calendering process employed by them was such as to give temporary finish by pressing the fabric had not been controverted. No lasting change was brought about. The "grey" fabrics, therefore, did not become new and commercially different commodities because of their being calendered and did not cease to be "grey" cloth.
10. The ratio of the above judgment applies to the present case as well. We have noted that the calendering employed by the appellants did not result in imparting a lasting effect to the fabric. It was only a temporary finish. The contention of Shri Sunder Rajan that the above decision of the Supreme Court is not relevant and applicable has no force. He seeks to buttress his contention by citing the Supreme Court's judgment in the cases of Empire Industries Ltd. and Ors. v.Union of India and Ors. 1985 (20) E.L.T. 179 and Ujagar Prints, etc., v. Union of India and Ors. 1988 (38) E.L.T. 535. However, as correctly pointed out by Shri Rangaswamy, the question of temporary or permanent effect imparted to fabrics by the process employed on them was not one before the Court in those cases. Those judgments are, therefore, of no help to the Revenue. Nor is the Tribunal's decision in the case of Verma Industrials Ltd., Bangalore v. Collector of Central Excise, Bangalore 1984 (18) E.L.T. 403 relevant, for, the question there was whether the appellants were liable to pay duty on account of their activity of dyeing cotton fabrics. The appellants had contended that their process was 'Katcha' and not Tucca' dyeing and that such dyeing was not fast. The Tribunal rejected this contention in the light of the amendments to Section 2(f) of the Act and the tariff entry whereby dyeing was specified as a process in the definition and the entry. This decision evidently has no application to the present case.
11. In the result, the impugned order is set aside. This appeal is allowed with consequential relief to the appellants.