1. The short question to be decided in this appeal is whether embroidered grey cotton fabrics subjected to the process of bleaching or dyeing attract further levy of Central Excise duty. The appellants, who have been engaged in the processing of such fabrics, filed a classification list effective from 31-7-1987 and sought exemption from duty in terms of clarification issued by the Central Board of Excise & Customs in their letter F. No. 25/12/69-Cx. 2 dated 18-1-1974 which is as under :- "Doubts have been raised whether processing duty is payable on a fabric on which embroidery has been done and which, thereafter, is subjected to further processing of bleaching, dyeing, mercerising, etc." 2. The question has been examined in consultation with the Ministry of Law and the Comptroller & Auditor General. The Board has been advised that since the base fabric and the embroidery fall under two different tariff sub-items, once the base fabric has been converted into embroidery, it goes out of the tariff sub-item for the base fabric and becomes classsifiable under the tariff sub-item for the embroidered fabric. Such embroidered fabric, even if subjected to processing will not again fall under the tariff sub-item for base fabric. Therefore, no further processing duty is leviable on base fabric which has been subjected again to processing after being embroidered." 3. The Assistant Collector did not accept the appellant's claim for exemption from duty and, issued a show cause notice asking them to show cause why duty should not be demanded from them on processing of embroidered fabrics under sub-heading 5805.13 read with Notification 255/82 dt. 8-11-1982 after modifying the classification list in terms of Rule 173B of the Central Excise Rules, 1944. The appellants contested the demand on the ground that the tariff description of Heading 58.05, which was as under, relates to manufacture of embroidery and not to the processing of already manufactured fabrics.
- Manufactured with the aid of vertical type automatic shuttle Embroidery Machines operated with power: 4. The appellants also submitted that they were independent processors who received embroidered fabrics from their customers on which duty liability under Heading 58.05 is deemed to have been discharged; that in Notes to Chapter 58 there is no mention of the processing of embroidered fabrics so as to amount to manufacture. After hearing the appellants, the Assistant Collector passed an order holding that, in the absence of standard length of the embroidered pieces, they could not be treated as "embroidery in the piece" falling under sub-heading 58.05.13 and were also not covered by the Ministry's clarification dated 18-1-1974. The Assistant Collector, therefore, decided that the cotton embroidered fabrics subjected to bleaching and dyeing would attract duty under the appropriate sub-heading of Chapter 52 depending upon the value of fabrics.
5. On appeal to Collector (Appeals), the order of the Assistant Collector was upheld and the appeal rejected on the ground that, in view of the bleaching and dyeing of the embroidered fabrics, classification under Chapter 52 - the Chapter for base fabrics - is appropriate. She also did not accept the clarification contained in the Board's letter dated 18-1-1974 as applying to the subject goods on the ground that at that time the processes of "bleaching" and "dyeing" were not specified in Section 2(f) of the Central Excises and Salt Act, 1944 as processes of manufacture - processes which were subsequently included in the definition of manufacture under the Central Excises and Salt Act in 1944 and in the Central Excise Tariff Act in 1985. She also rejected the plea of the appellants that they were not asked to show cause for classification under Chapter 52 whereas the Assistant Collector passed an order classifying the processed embroidered cotton fabrics under that Chapter by saying that she found a specific mention about it in the show cause notice itself.
6. The orders of the lower authorities have been assailed on the ground that the allegation made in the show cause notice by the Assistant Collector was different from the one on the basis of which he passed the final order; that it is not mentioned anywhere that the "embroidery in the piece" should be of the same standard uniform lengths; that Board's clarification" of 1974 was continued to be followed all along and was still applicable considering that the base fabric and embroidered fabric were classifiable under different items/headings.
7. Arguing for the appellants, Shri A.K. Jain, the Ld. Counsel, cited the decisions of the Tribunal in the case of Shri Kanta Haldar v.Collector of Central Excise [1990 (53) E.L.T 425] and in the case of IGE (India) Ltd. v. Collector of Central Excise [1990 (53) E.L.T 461] in both of which it was decided that an adjudication order cannot traverse beyond the allegations made in the show cause notice. Shri L.C. Chakraborty, Ld. S.D.R., fairly conceded that while the classification proposed in the show cause notice was under sub-heading 5805.13 read with exemption Notification 255/82, the Assistant Collector decided the classification to be under a different Chapter altogether, viz., Chapter 52.
8. Shri Chakraborty also submitted that the Tribunal has held in a number of cases that it is not necesary to confine the question of classification of goods to the tariff entries in dispute and if the Tribunal reaches the conclusion on a full consideration of the matter that the correct classification lies beyond the tariff entries in dispute, it is free to decide the matter accordingly. He referred to the decisions of the Tribunal in the case of Collector of Central Excise v. Shalimar Paints [1987 (29) E.L.T. 1001 (Trib.)] and the case of Collector of Central Excise v. Kanoria Chemicals [1987 (29) E.L.T.681]. Shri Chakraborty, therefore, submitted that what was important was to decide the correct classification of embroidered grey cotton fabrics which were subjected to the process of bleaching or dyeing and if Chapter 58 did not cover the goods in order to determine the correct classification, the Tribunal was free to traverse beyond the classifications cited in the dispute.
9. Shri Chakraborty made the alternative submission that in view of the larger bench decision of the Tribunal in the case of Guardian Plasticoats v. Collector of Central Excise [1986 (24) E.L.T. 542] and as confirmed by the Supreme Court in the case of Uma Laminates and Laminated Packaging, once the process of bleaching and/or dyeing was undertaken on the embroidered grey cotton fabrics, such fabrics could be considered to have undergone the process of manufacture and were, therefore, once again dutiable under sub-heading 5805.13 itself. He cited the two important decisions of the Supreme Court on the question viz. Empire Industries v. Union of India [1985 (20) E.L.T. 179] and Ujagar Paints v. Union of India [1988 (38) E.L.T. 535] in which it was held that the processes of bleaching, dyeing, etc. amount to 'manufacture' in terms of Section 2(f) of the Act because a new commercial commodity comes into existence. He made another alternative submission that the goods could be classified under sub-heading 5805.19.
10. Shri Chakraborty, further, submitted that although sub-headings 5802.12 and 5802.14 make specific mention that the processes of bleaching, dyeing, printing or any other processes shall amount to manufacture, classification of the subject goods under 5802.19 "Other" does not mean that such processes are excluded from that subheading.
11. Referring to sub-rule (5) of Rule 173 B, Shri Chakraborty stated that a classification list can always be modified prospectively by the Assistant Collector by following the prescribed procedure. He cited the decision of the Supreme Court in the case of Elson Machines Pvt. Ltd. v. Collector of Central Excise [1988 (38) E.L.T. 571] in support of his contention.
12. Citing the publication 'Words & Phrases' by S.B. Sarkar about the meaning of the expression "embroidered in the piece", Shri Chakraborty submitted that the word 'piece' means 'a definite quality, as of cloth or paper' [Radha Fancy Price Goods Merchants v. State of Kerala 1981 (48) STC 361 (Ker.)]. He stated that since the length of the pieces in the present case varied from 5 metres to 14 metres, the subject goods could not merit classification under Chapter 58 but under Chapter 52 depending upon various factors like value, count, etc.
13. Replying, Shri Jain submitted that sub-heading 5805.19 not having been cited in the show cause notice, the department could not seek classification of the goods under that sub-heading at this stage. He cited the following decisions on this point:Control Tool Room, Ludhiana v. Collector of Central Excise, ChandigarhCollector of Central Excise v. Bright Brothers Ltd., Bombay 1990 (16) ETR 714] (c) Tribunal's Order No. 1166/90-C dt. 30-10-1990 in the case of Collector of Central Excise, Bombay II v. Morision (India) Ltd. 14. Shri Jain also contested the claim of the Ld. SDR that, by undergoing the process of bleaching/dyeing, the embroidered grey cotton fabrics had been subjected to the process of "manufacture" and stated that what the appellants had received were "embroidered cotton fabrics" and what was being sent out by them were also "embroidered cotton fabrics". Here entry 5805.13, according to Shri Jain, could not attract any further levy of duty even though the goods were bleached/dyed. He also submitted that the use of the word "piece" has to be distinguished from the word "running length".
15. Refuting the arguments of Shri Chakraborty, Shri Jain, further, submitted that the approval of classification lists cannot be disturbed unless new facts have come to light or there has been a change in the law. He contended that none of these circumstances exist in the present case to justify such action. He cited the decision of the Delhi High Court in the case of J.K. Synthetics v. Collector of Central Excise [1981 (8) E.L.T. 328] and of Calcutta High court in the case of Nayak Associates [1991 (55) E.L.T. 189].
16. Continuing further, Shri Jain submitted that even in such cases, the demand has to be prospective and submitted that the Assistant Collector has not stated anywhere that any new facts have come to light.
17. Although various other grounds were urged during the hearing, we consider that we can decide the appeal on the short point of the Assistant Collector having traversed beyond the allegations in the show cause notice. This, itself, is a clear violation of the principles of natural justice. The Ld. SDR had very fairly conceded this point although Shri Jain had contested the suggestion for remanding the matter on the ground that all the facts were available before the Tribunal to finally decide the matter. He cited the decisions of M.P.High Court in the case of Suresh Chandra v. Ram Chandra Arora (A.I.R.1988 M.P. 247) and in the case of Raja Vikramaditya Singh v.Commissioner of Income-tax [169 (1988) I.T.R. 55] about the nature and extent of the powers of remand.
18. The proposition which the Ld. Counsel has raised opposing the suggestion of remand is that since all the facts for deciding the appeal were available to the Tribunal, it was not permissible to remand the matter to the lower authorities. The M.P. High Court has held in Raja Vikramaditya's case (supra) that the principles to be followed in such matters have been laid down by the Calcutta High Court in the case of United Commercial Bank v. C.I. T. (1982) 137 I.R. 434. To quote "...while the Tribunal's power of remanding an appropriate case to investigate fresh facts cannot be disputed, it must be borne in mind that the power must be exercised with proper discretion and that it should not be exercised if all the basic facts required for disposal of the matter is already on record." "Keeping in view the aforesaid principles, let us turn to the facts of the instant case. The Appellate Assistant Commissioner had before him the entire material on record, the receipts issued on behalf of the assessee in respect of the agreements entered into by the purchasers, the sale deeds executed by them and the sale deeds of plots of land in the neighbourhood for showing comparative sales.
All this material was considered by the Appellate Assistant Commissioner. The Tribunal was not right in holding that the old and the new plans giving the numbers of the plots were produced for the first time before the Tribunal. Remitting the case to the Appellate Assistant Commissioner for having "a fresh look on the entire matter" was not justified. It would not be a sound exercise of discretion by an appellate authority to remit a case to the subordinate authority for writing such order as would, in the opinion of the appellate authority, be a proper and better order. On the facts and in the circumstances of the case, therefore, the Tribunal, in our opinion, was not justified in remanding the case to the Appellate Assistant Commissioner for deciding it afresh." 20. In the Suresh Chandra's case (supra), the M.P. High Court had observed that if no useful purpose will be served by a remand and the issue can be decided on admitted facts, the empty formality must be eschewed to advance the cause of justice.
21. We have to consider whether, in the light of these two judgments, the objection of Shri Jain against remanding of the matter to the lower authorities is sustainable. For this purpose, we have to see the reason why the suggestion for remand has been made. In the present case, while the allegation in the show cause notice was that duty was demandable under sub-heading 5805.13, the Assistant Collector passed an order classifying the goods under Chapter 52. This order was passed in the absence of any allegation that the goods were classifiable under Chapter 52 with the result that there was denial of opportunity to the appellants to meet the allegation and it is in these circumstances that it was suggested that the matter be remanded. Thus, it is not one of the type of cases referred to in the two judgments of the High Court cited before us. We are, therefore, within one's competence to remand the matter.
22. While deciding the matter, it is necessary to see whether the orders of the lower authorities have been passed after complying with the principles of natural justice and if so, whether all facts were taken into consideration before passing the order. The present appeal relates to classification of goods which has to be correctly determined by the Assistant Collector in accordance with Rule 173B, and in doing so, he has disregarded the principle that since he did not want to accept the classification proposed by the appellant in the classification list, it was obligatory on his part to set out the grounds for not accepting it in the show cause notice. Since this has not been done, it is a fit case for referring the matter back to the Assistant Collector for a fresh decision in accordance with law.
Accordingly, we set aside the orders of lower authorities without going into the merits of the matter and remand the case to the Assistant Collector for fresh adjudication. Thus, the appeal is allowed by remand.