Customs, Excise and Gold Tribunal - Mumbai
Commissioner Of Customs And Central ... vs Swastik Dyeing And Bleaching Factory ... on 30 December, 2003
Equivalent citations: 2004(170)ELT491(TRI-MUMBAI)
JUDGMENT Jyoti Balasundaram, Member (J)
1. The miscellaneous applications filed by the Revenue are allowed, condoning the delay occasioned in filing the above appeals, as the Revenue had initially filed consolidated/combined appeals against different groups of textile processing units for the reason that the adjudicating authority had held each group to constitute a single manufacturing unit, and independent appeals have now been filed by bifurcating those combined appeals, as per the procedure laid down by the Tribunal.
2. Now we take up the appeals for decision.
3. The above appeals arise out of a common order of the Collector of Central Excise, Pune and arc hence heard together and disposed of by this common order. Several groups of textile processing units have been treated as single manufacturing units for the purpose of denial of the benefit of exemption under certain Central Excise notifications. The groups units are enumerated below:
I
1. M/s. Arvind Processors
2. Raj Processors 3 M/s. Mangalmurti Processors II 1 M/s. Swadeshi Dyeing and Bleaching 2 M/s. Silver Processors III
1. National Dyeing and Bleaching
2. M/s. Gopal Processors
3. M/s. Deep Processors
4. M/s. Sudarshan Processors
5. M/s. Harish Processors IV
1. M/s. Yeshwant Co-operative Processors
2. M/s. Ichalkaranji Processors V
1. M/s. Laxmi Co-operative Processors
2. Vishnu Laxmi Processors VI
1. M/s. Deccan Processors
2. M/s. Ganesh Processors VII
1. M/s. Shri Viankaesha Processors
2. M/s. Shri Saraswati Processors VII
1. M/s. Rahul Processors IX
1. M/s. Swastik Dyeing and Bleaching
2. M/s. Shri Datta Calendaring
3. M/s. Shree Ram Processors X 1 M/s. Bombay Bleaching and Dyeing
2. M/s. Bombay Textiles XI
1. M/s. Anand Processors
2. M/s. Ganesh Felt and Calendaring Works XII
1. M/s. Jubilee Dyeing Processors
2. M/s. Royal Calendaring XIII
1. M/s. Diamond Processors
2. M/s. Mali Processors XIV I. M/s. Radha Kanhaya Processors
2. M/s. Dwarkadish Calendaring XV
1. M/s. Shri Datta Processors
2. M/s. Balaji Processors XVI
1. M/s. Thawani Processors
2. M/s. Maheshwari File Textiles
3. M/s. Suruchi Textiles.
As almost similar facts are involved in the case of all these groups, we are setting out the facts arising out of group No. IX as illustrative of all.
4. M/s. Swastik Dyeing & Bleaching Factory (SDBF) is a Partnership firm set up in 1975 and was engaged in the processes of Bleaching and Stentering of Cotton Fabrics falling under the erstwhile Tariff Item No. 19I(b) by hand till 1984. SDBF was also paying the duty under the Compounded Levy Scheme till 1979 and was holding Central Excise L-4 Licence. SDBF became a power operated unit in April, 1984 and was carrying on the following activities at their factory thereafter viz:
(i) Squeezing out water from the fabrics; and
(ii) Stentering on the Cotton Fabrics bleached and mercerised or only bleached without aid of power, received from M/s. Shree Ram Processors.
SDBF informed the department about the above activities vide letter dated 19/04/1984. SDBF was availing the benefit of total exemption under Notification No. 253/82-CE dated 08/11/1982 as amended in respect of the processes carried out by them. The notification provided total exemption from basic and additional duty to Cotton Fabrics when subjected to certain specified processes. Sub-clause (ii) of the proviso to the Notification, as is relevant for the present case, read as under:
"Provided that no such exemption shall apply-
"(i)......
"(ii) if cotton fabrics, failing under sub-item 1 of the said item No. 19, are subjected to any process or processes specified in the said Table within the same factory in which they have been subjected to any process other than the processes specified in the said Table".
For the period prior to 08/11/1982, similar exemption and proviso was contained in Notification No. 80/76-CE dated 16/03/1976 as amended vide Notification No. 292/79-CE dated 24/11/1979.
5. Shri Datta Calendering (SDC) was set up in 1975 and was engaged in the process of calendaring of Cotton Fabrics with the aid of power, but without grooved rollers and was also availing the exemption under Notification No. 253/82-CE.
6. M/s. Shree Ram Processors (SRP) was set up on 14/05/1976 as a Proprietory concern and was converted into Partnership firm on 08/04/1978. SRP was engaged in the following activities viz:
(i) Bleaching of Grey Cotton Fabrics by hand; and
(ii) Mercerising by Hand-operated machines.
SRP was paying the duty under the Compounded Levy Scheme till 1979 and was holding separate Central Excise L-4 Licence. Thereafter, SRP was availing total exemption under Notification No. 130/82-CE dated 20/04/1982 which granted total exemption to Cotton Fabrics processed without aid of power or steam.
7. Between 05/09/1985 and 07/09/1985 Central Excise officers visited the premises of M/s. Swastik Dyeing and Bleaching Factory (hereinafter referred to as SDBF), M/s. Shri Datta Calendering (hereinafter referred to as SDC), power operated unit, and M/s. Shree Ram Processors (hereinafter referred to as SRP), non-power operated unit and observed that the three units in the vicinity of each other had several common features and were so related with one another as to constitute a single unit in the eye of law. The features are as under:-
i) M/s. SDBF has rented out about 2000 sq.ft. area to M/s. SDC on half yearly rent of Rs. 900/- but there is no rent contract. M/s. SDBF could not produce rent receipt prior to 01/01/1984 though M/s. SDC is in existence from 1975, which shows that prior to 01/01/1984 M/s. SDC was utilising the premises without any charges.
ii) Similarly M/s. SDBF has rental premises for boiler in the premises of M/s. SRP but it is without any rent agreement and rent receipt is from 01/01/1984.
iii) Water tank is situated in the premises of M/s. SRP and water is being utilised by all the three said units, but nobody except M/s. SDBF is contributing financially for the water thus utilised.
iv) The bleaching section and mercerising units (hand operated) and grey fabrics godown of M/s. SRP are situated in the premises of M/s. SDBF for which rent is paid by M/s. SRP but there is no rent contract. The rent is paid from 01/01/1984. The rent involved is not paid by any of the units in cash or by cheques, but it is simple book adjustment.
v) M/s. SDBF is situated in plot No. 62 to 66 and M/s. SRP is situated in Plot No. 69 and 70 of Jaysingpur Co-op. Industrial Estate, but mere is no compound wall or fencing in between the two, but mere is a through fare from one unit to another.
vi) Similarly M/s. SDBF is sending stentered fabrics to M/s. SDC through a common door for calendaring and after calendaring M/s. SDC returns the calendered fabrics to M/s. SDBF for folding, finishing and packing through another common door. Thus the situation exist as if one factory is having different sections.
vii) M/s. SDBF, M/s. SDC and M/s. SRT is having common time office and a common clerk who looks after the work of time office and expenses are born by M/s. SDBF.
viii) Shri Brijmohan Bora Writes 'Khatavni of M/s. SRP, M/s. SDC, and M/s. SDBF, who is actually on the payrole of M/s. SDBF without getting remuneration from M/s. SRP, M/s. SDC.
ix) Shri Ramchandra Shankar Moghe, Partner of M/s. SDBF, is a key person in all the three units and supervise all the technical operations in M/s. SRT, M/s. SDC and but gets profit share only from M/s. SDBF. He was also partner in M/s. SRP upto 09/04/1985 as a representative of trustee of M/s. Shri Hari Textile Trust.
x) It was also observed that M/s. SDBF and M/s. SRP have different water connections but M/s. SRF had dead water connection and it is seen that M/s. SRP is getting water by tanker and water from SDBF also, for which water charges are borne by M/s. SDBF.
xi) It was also observed that M/s. SDBF is having two power meter connections. Out of which one power meter is supplying electricity to M/s. SDC and charges are borne by M/s. SDBF and also steam is supplied for calendaring to M/s. SDC by M/s. SDBF for which charges are borne by M/s. SDBF.
xii) M/s. SDBF has owned one telephone which is commonly used by M/s. SDC and M/s. SRT. But telephone charges are paid by M/s. SDBF only. Also telephone in the name of Shri R.S. Moghe, Partner of M/s. SDBF is installed in the office of M/s. SDBF, But utilised by M/s. SDBF, M/s. SDC and M/s. SRT and telephone bills are paid by M/s. SDBF. Letterheads of M/s. SDBF and M/s. SDC and M/s. SRT show common telephone No. 291, 486.
xiii) M/s. SDBF has one water effluent treatment plant in plot No. 62 to 66 but in the same effluent water of M/s. SRT is also treated and cost of plant, that is electricity and chemicals, is borne by M/s. SDBF.
xiv) M/s. SDBF is owning truck No. MHL 7444, which is also used by M/s. SRP for bringing grey fabric for hand processing but the expenses and taxes are borne by M/s. SDBF only.
xv) M/s. SDBF, M/s. SDC & M/s. SRT has common office accommodation situated in the premises of M/s. SDBF. No office accommodation charges are recovered from M/s. SRP and M/s. SDC.
xvi) M/s. SDBF, M/s. SDC and M/s. SRT has no written agreement to supply entire hand processed fabrics to M/s. SDBF. But actually all the hand processed fabrics are sent to M/s. SDBF for stentering and finishing.
xvii) Shri R.S. Moghe, Partner of M/s. SDBF has long experience in processing line and he is giving technical expertise to M/s. SRT, and M/s. SDC without any remuneration.
xviii) The work in M/s. SRT hand processed units is given on contract to a contractor thus establishing that the partners of M/s. SRP are not taking any special pains actually to carry out day to day work. The hand processing unit is set up only to ensure study receipt of hand-processed goods in their power operated unit and thus to evade Central Excise duty on the finished products.
xix) M/s. SRT, SDC and M/s. SDBF have common accounting i.e., Diwali to Diwali.
xx) M/s. SRT, M/s. SDC and M/s. SDBF have common capacity for (a) mercerising and bleaching; (b) calendaring, (c) stentering and finishing respectively. As if they are made fore ach other. Prior to 1984 M/s. SDBF was carrying out bleaching and mercerising and stentering by hand.
xxi) As per the balance sheets expenses for coal and fire wood appearing in the balance sheet of all the three units which indicates that though the boiler belongs to M/s. SDBF the steam is utilised by M/s. SDC, M/s. SRT.
xxii) Also it was observed that all workers of M/s. SRP, M/s. SDC and M/s. SDBF are using common sanitary block existing in the premises of M/s. SDBF and maintained by M/s. SDBF only.
xxiii) There is common maintenance staff for M/s. SDBF, SDG and M/s. SRT. But they are paid by M/s. SDBF.
xxiv) It can be seen from the partnership deed that Shri Ramchandra Shankar Moghe partner of M/s. SDBF's wife Mrs. Ujwala Ramchandra Moghe is partner of M/s. SDC. Similarly Shri T.L. Vyas partner of M/s. SDBF's wife is partner of M/s. SDC Mrs. Premlata Tulsiram Vyas. Similarly Shri R.S. Moghe and Shri V.S. Moghe are brothers who are partners in M/s. SDBF. Shri V.S. Moghe partner of M/s. SDBF's son Shri Arvind Vasudeo Moghe is partner of M/s. SDC. Also son of Shri S.L. Vyas partner of M/s. SDBF, Shri R.V. Vyas is partner of M/s. SDC. So also Mrs. Manjushri Moghe partner of M/s. SRP is related to Shri R.S. Moghe and Shri V.S. Moghe partner of M/s. SDBF.
xxv) M/s. SRT Jaisingpur non-power operated unit is receiving grey fabrics from the merchants with the instructions that the fabrics supplied by them etc., to be bleached and mercerised. There are no specific instructions to transfer bleached and mercerised fabrics to M/s. Swastik Dyeing & Bleaching Factory for stentering, folding, bailing, stamping and to M/s. SDC for calendaring, however, hand bleached and mercerised fabrics is invariably sent to M/s. SDBF and M/s. SDC to carry out finishing operations. There is no agreement between non-power operated unit and power operated unit to conduct the business in the manner explained above.
8. Statements of the partners of the unit were recorded. Investigation revealed that cotton fabrics were subjected to the process of bleaching and mercerising and stentering in M/s. SDBF prior to 1984 with the aid of power and were thereafter subjected to the process of stentering in M/s. SDC with the aid of power.
9. Pursuant to the Investigation carried out by the Anti-Evasion Officers of Pune Collectorate, a Show Cause Notice dated 19/09/1985 was issued to all the three units, inter-alia , asking them to show cause as to why:
(i) Central Excise duty amounting to Rs. 8,71,36,645.29 as per Annexure 'C' thereto at appropriate rate should not be recovered from them on Cotton Fabrics processed falling under T.I. 191 (b) in their factories and cleared during the period from 01/09/1980 to 31/08/1985 without payment of central excise duty under Rule 9(2) of the Rules read with Section 11A of the Act; and
(ii) penalty should not be imposed on them under Rule 9(2), 52A and 173Q of the Rules on the alleged grounds stated therein.
10. It was mainly alleged in the impugned notice that:
a) the cotton fabrics were subjected to process of bleaching and mercerising at M/s. SRP & bleaching, mercerising and stentering in M/s. SDBF prior to 1984 without the aid of power and were thereafter subjected to the processes of stentering, bailing in M/s. SDBF and calendaring in M/s. SDC with the aid of power.
b) the bleaching Section and mercerising units (hand operated) and grey fabrics godown of M/s SRP are situated in the premises of M/s. SDBF for which rent is paid by M/s. SRP but there is no rent contract. The rent is paid from 1.1.84. The rent involved is not paid by any of the units in cash or by cheques, but it is simple book adjustment.
c) M/s. SRP Jaisingpur non-power-operated unit is receiving grey fabrics from the merchants with the instructions that the fabrics supplied by them etc. are to be bleached and mercerised. There are no specific instructions to transfer bleached and mercerised fabrics to SDBF for stentering, folding, bailing, and to M/s. SDC for calendaring, however hand bleached and mercerised fabrics is invariably sent to M/s. SDBF and M/s. SDC to carryout finishing operations. There is no agreement between non-power operated unit and power operated unit to conduct the business in the manner explained above.
11. The notice alleged that:
a) In terms of Notification No. 80/76-CE and 122/76-CE both dated 16.03.1976 as amended by the Notification No. 253/82 dated 08.11.1982 and by Notification No. 54/85 dated 17.03.1985 fabrics subjected to the processes of bleaching and mercerising without the aid of power when subjected to the processes of stentering, calendaring, bailing etc., with the aid of power at the same unit are not entitled to exemption.
b) Partners of M/s. SDBF had/have therefore created apparently independent entities viz. M/s. SRP and M/s. SDC to wrongly avail to the benefit of the said notification.
c) M/s. SDBF, M/s. SDC and M/s. SRP have colluded with one another to fragment what is essentially one unit into three units to avail the benefit of notification No. 130/82-CE and 253/82-CE and have suppressed the true relationship deliberately which they were supposed to declare to the department;
d) The bleached and mercerised C.F. initially processed without aid of power by non-power operated unit and subsequently finally processed, finished, packed and cleared under exemption Notification No. 253/82-CE are liable for central excise duty for the period from 01/09/1980 to 31/08/1985.
12. Consequent upon the adjudication proceedings held in the matter, the Collector of Central Excise, Pune, vide a common Order-in-Original dated 10/06/1986 upheld the allegation that the three units i.e. SDBF, SDC and SRP are a single manufacturing unit i.e. the same factory for the purpose of the Central Excise & Salt Act, 1944 in view of the findings recorded therein, holding as under:
"for the above reasons I am of the firm opinion that the various non-power operated units and the corresponding power operated units mentioned against each serial number constitute a single manufacturing unit i.e., the same factory for the purpose of Central Excises and Salt Act, 1944. The concerned units should therefore immediately apply for a licence/amendment of the license as the case may be, under Rule 174 in respect of the entire premises of the power operated unit and the corresponding non-power operated unit mentioned against each serial number of the order. If any of the parries at Sr. No. 1 to 16 fails to do so within 10 days of the receipt of this order, the licenses if any, will stand cancelled and action will be taken for manufacture of goods without a valid licence.
The demands under reference for the past period are set aside for the reasons given in the earlier part of the order.
No penalty is imposed in view of the facts and circumstances of the cases."
However, the Collector discharged the show cause notice on the grounds of limitation holding that the existence of these apparently independent units was or should have been within the knowledge of the departmental officers and that in view of the tacit or explicit approval granted to the units, the demand, if any, would be effective only prospectively.
13. Hence these appeals by the Revenue and the assessees and cross-objections of assessees in Revenue's appeals.
14. We have heard both sides and record our findings as under:
I. Entire demand is time-barred and proviso to Section 11A(1) is inapplicable:
a) All the units have come into existence much prior to 24/11/1979, when the disputed proviso was added to Notification No. 80/76-CE for the first time. Therefore, major premise of wilful suppression on account of deliberate fragmentation of units is incorrect. Prior to 24/11/1979, even if all the units are treated as one factory, all the activities would have been exempt. Bleaching/Dyeing etc. would be exempt as done without aid of power under Notification No. 137/77-CE and calendaring under Notification No. 80/76-CE unconditionally. Hence, alleged fragmentation done much prior to 24/11/1979 cannot be to evade duty. Real cause of dispute in the present case is the proviso to Notification No. 80/76-CE added by Notification No. 292/79-CE. This cannot be covered by proviso to Section 11A.
b) The legislative history surrounding the amendments made on 24/11/1979 will show that intentional evasion of duty cannot be attributed to the Assessees/Respondents. On 14/05/1979, the Central Excise & Salt And Additional Duties of Excise (Amendment) Bill, 1979 was introduced in Parliament proposing the insertion of Sub-clause (v) in Section 2(f) of the Act so as to include bleaching, mercerising, dyeing, printing etc. within the meaning of the term "manufacture" under Section 2(f) in relation to goods comprised in item No. 191. The Statement of Objects and Reasons appended to the Bill clearly provided that the amendment was introduced to overcome the difficulty that has arisen as a result of the judgment of the Hon'ble Gujarat High Court in the case of Real Honest Textiles v. Union of India vide which the Hon'ble Court held that the terms "Fabric" as used in the Tariff description "Cotton Fabric" under Tariff Item No. 19 would refer to only "grey cloth" and that processing of the grey cloth either by bleaching, dyeing or printing does not amount to "manufacture". Thereafter, on 24/11/1979, the Central Excise and Salt Act and Additional Duties of Excise (Amendment) Ordinance, 1979 was introduced so as to give immediate effect to the amendment proposed in the aforesaid Bill. The effect of the ordinance was that each of the processes because dutiable and the duty would be payable at each stage even though the said processes were carried on within the same factory, and the processors would be compelled to follow the procedure of Rule 56A.
c) To avoid the above situation, Notification No. 291/79-CE was issued on 24/11//1979 wholly exempting processed cotton fabrics falling under' Tariff Item No. 19I(b) when used within the factory of production for the manufacture of cotton fabrics subjected to any further processing. In other words, the processed cotton fabrics, when further processed within the same factory of production were wholly exempt from payment of BED and AED.
d) Vide another Notification No. 290/79-CE, also dated 24/11/1979, unprocessed cotton fabrics, of T.I. No. 19I(9) were wholly exempted from BED and AED when used within the factory of production for further manufacture of processed cotton fabrics falling under T.I.No. 19I(b).
e) On the same date i.e. 24/11/1979, another Notification No. 292/79-CE was also issued amending Notification No. 80/76-CE introducing the fateful proviso to the latter. Vide Notification No. 293/79-CE dated 24.11.1979 similar proviso was added to Notification No. 122/76-CE.
f) As is obvious, the purpose for introducing the proviso in Notification No. 80/76-CE was to ensure that the duty would be paid by an integrated/composite mill at the final stage, say calendaring. This is because, but for the proviso, no duty would be paid on dutiable processes like bleaching, dyeing or printing carried on with aid of power or steam accompanied with dutiable finishing processes like Calendering, Stentering, Singeing, Scouring etc as dutiable processes would be completely exempt under Notification No. 291/79-CE dated 24/11/1979 and finishing processes would be exempt under Notification No. 80/76-CE as amended. The obvious objective was to avoid a situation where duty would become payable at every stage (on account of the retrospective amendment to Section 2(f) supra) and collect it at the final stage. Also, at the same time, it was to be ensured that duty on account of dutiable processes do not escape payment at any stage. The legislative intention is that duty on dutiable processes like bleaching, dyeing etc. done with the aid of power would be paid by the processor i.e. integrated/composite mill at the final stage, i.e. calendaring. This alone was the object sought to be achieved by adding the above proviso to Notification No. 80/76-CE by Notification No. 292/79-CE dated 24/11/1979. Notification No. 80/76-CE as amended by Notification No. 292/79-CE continued to be in operation till 04/11/1982, on which date, it was superseded by similar Notification No. 253/82-CE. Notification No. 137/77-CE granting total exemption from BED and AED to Cotton Fabrics processed without aid of power or steam was maintained undisturbed in Notification No. 130/82-CE. However, instead of achieving the stated objective of the legislature, the proviso added created a very anomalous situation. An integrated/composite mill carrying on the process of bleaching, dyeing or printing (without aid of power) accompanied with calendaring within the same factory, was not paying processing stage duty in view of Notification No. 1-37/77 (Processing without aid of power). They were also not paying duty on calendaring in view of Notification No. 80/76. This was entirely in accordance with the Government's intention. However, because of proviso added by Notification No. 292/79 to Notification No. 80/76-CE, bleaching, dyeing or printing done without aid of power also became dutiable. This was not at all the object of the legislation, as is evident from the legislative history surrounding the amendments made on 29/11/1979.
g) Moreover, the ambiguity in the Notifications and the anomalous situation which had arisen on account of the insertion of proviso in Notification No. 80/76-CE vide Notification No. 292/79-CE and also continued as a part of the subsequent Notification No. 253/82-CE, rules out any possibility of wilful suppression of facts with an intent to evade payment of duty against the Respondents. If anything, the creation of independent units - and not the fragmentation, as alleged - and that to much prior to 24/11/1979 had achieved, albeit unknowingly, the real object and purpose of the legislature.
In the light of the above discussion we uphold the finding that the demands are barred by limitation.
II. "Manufacturing Process" would be exempt under Notification No. 137/77-CE dated 18.6.1977 having been undertaken without aid of power or steam and "Finishing Processes" viz, Calendering and Stentering do net amount to "manufacture":
a) Prior to 1979, the relevant sub-item No. I of Tariff Item No. 19 read as under:
"COTTON FABRICS -
--- --- ---
I. Cotton Fabrics other than (i) Embroidery in the pieces, in strips or in motives, and (ii) Fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials."
However, Section 2 (f) of the Act was amended vide Act (No. 6 of 1980) dated 12/02/1980 whereby Sub-clause (v) was inserted in the Section retrospectively w.e.f. 24/11/1979. The relevant part of amended Section 2(f) read as under:
"Section 2(f) - "Manufacture" includes any process incidental or ancillary to the completion of a manufactured product; and
(v) in relation to goods comprised in Item No. 19-1 of the First Schedule, includes bleaching, mercerising, dyeing, printing, waterproofing, rubberizing, shrink-proofing, organdie processing or any other process or any one or more of these processes;
Simultaneously, Tariff Item No. 19I(b) also stood amended as under, vide Act 6 of 1980 w.e.f. 12.2.1980:-
"19. Cotton Fabrics -
I. Cotton fabrics, other than (i) embroidery in the piece, in strips or in motifs and (ii) fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials and (iii) fabrics covered partially or fully with textile flocks or with preparations containing textile flocks -
(a) cotton fabrics, not subjected to any process.
(b) cotton fabrics, subjected to the process of bleaching, mercerising, dyeing, printing, waterproofing, rubberizing, shrink-proofing, organdie processing or any other process or any two or more of these processes.
Thus, after the amendments made by Act 6 of 1980, each of the processes like bleaching, mercerising, dyeing, printing etc. became dutiable. Vide another Budgetary Notification No. 137/77-CE dated 18/06/1977, Cotton Fabrics falling under T.I. No. 19 when processed without aid of power or steam, were wholly exempted from payment of BED and AED. The relevant Notes on Budget changes (1977-78) read as under:
"Item 19 - Cotton fabrics -
(1) .......
(2) .......
(3) Unprocessed cotton fabrics manufactured on powerlooms (factories without spinning or processing plants) are proposed to be exempted from both basic and additional duty of excise.
(4) Cotton fabrics when processed without the aid of power or steam are also proposed to be exempted from both basic and additional duty of excise.
Notification No. 137/77-CE dated 18.6.1977 was continued as Notification No. 130/82-CE dated 20/04/1982.
b) As seen from para 4, page 1 of Annexure 'A' to SCN, activities of SRP are bleaching by hand and mercerising by hand-operated machines. Hence, these activities would be wholly exempt under Notification No. 130/82-CE effective from 20/04/1982 and under Notification No. 137/77-CE dated 18/06/1977 prior to 20/04/1982. As per para 6 -page 2 of Annexure 'A' to SCN, SDC is undertaking calendaring with aid of power, admittedly with plain rollers. Such process of "calendaring" has been held to be not amounting to "manufacture" within the meaning of Section 2(f) of the Act by the Hon'ble Supreme Court vide judgments rendered in the case of Siddeshwari Cotton Mills (P) Ltd. v. UOI and Anr. reported in 1989 (39) ELT 498, and also Mafatlal Spinning & Manufacturing Co. Ltd v. CCE 1989 (40) ELT 218 (SC); and Bhartiya Textiles v. CCE 1991 (53) ELT 358 (Tribunal)
c) As per para (a) on page 5 of Annexure 'A' to SCN, SDBF is undertaking the process of "stentering". The term "stenter; tenter" has been defined and explained in the "The Textile Institute - Textile Terms and Definitions (Eighth Edition)" as under:
"stenter; tenter An open-width fabric-finishing machine in which the selvedges of a textile fabric are held by a pair of endless traveling chains maintaining welf tension. Note 1: Attachment may be by pins (pin stenter) or clips (clip stenter).
Note 2: Such machines are used for:
(a) drying,
(b) heat-setting of thermoplastic material;
(c) fixation of chemical finishes."
Since the goods involved are "Cotton Fabrics", the question of heat setting of thermoplastic material through stentering does not arise being relevant only in case of man-made fabrics. It is not the case in the SCN that SDBF undertake stentering for fixation of chemical finishes. It is therefore evident that the 'Stentering' was undertaken only for drying. Therefore, the ratio laid down by the Hon'ble Supreme Court in the Siddeshwari Cotton Mills' case (supra) with regard to "calendaring" equally apply to the process of "stentering" carried on by the Respondents on Cotton Fabrics and the same would also not amount to "manufacture" as envisaged under Section 2(f) of the Act.
d) Squeezing of excess water from the fabrics also does not amount to 'manufacture' in view of the principle laid down by the Larger Bench decision in Adreena Industries v. CCE, Chandigarh 1987 (28) ELT 364 (Tribunal).
e) Consequently, even if all the above units i.e. SDBF, SDC and SRP are one and constitute a single factory and are also treated as one manufacturer, the process of bleaching and dyeing undisputedly carried on without aid of power or steam, would be exempt under Notification No. 137/77-CE upto 19/04/1982 and thereafter, under Notification No. 130/82-CE. The process of "calendaring", "stentering" & "squeezing of excess water" do not amount to "manufacture" as contemplated under Section 2(f) of the Act. Consequently, there would be no liability to duty. In Natwar Textile Processors Pvt. Ltd. v. CCE, Surat 2000 (120) ELT 654 (Tribunal), the CEGAT dealing with an identical situation concluded that no duty would be payable.
We therefore answer this issue in favour of the assessees.
III. Bar contained in proviso to Notification No. 253/82-CE applies qua a factory and not qua a manufacturer:
a) The bar created under proviso to Notification No. 253/82-CE is 'qua factory' and not 'qua manufacturer'. This is clear from a plain reading of the Notification. Admittedly, in the present case, all the three units were different factories and recognized and accepted as such by the department which had issued separate L-4 Licences to the units who had even paid duty separately under Compounded Levy Scheme upto 1979 and well before the period of alleged demand. The various processes were also being carried on separately in the said factories. Therefore, the benefit of exemption under Notification No. 80/76-CE as amended by Notification No. 292/79-CE and/or Notification No. 253/82-CE cannot be denied to the Respondents. This is the law laid down by the CEGAT in the case of CCE v. Kanjur Bleaching Co. Pvt. Ltd. 2000 (117) ELT 47 (Tribunal). The test is whether the separate units are one factory or different factories is "premises based" in view of the clear language of the proviso to Notification No. 80/76-CE and/or 253/82-CE. In the present case, each process viz, bleaching, mercerising, dyeing is self-complete and distinct and treated by Tariff itself as distinct taxable events. The process of calendaring and stentering are also distinct. It is also not the case of the department that part of each process was being carried on in one premise and rest in another premise. It is also not the ease of the department that the processes involved are so interdependent and interconnected that but for each being carried out, the final product would not emerge. Also, if the Revenue's interpretation is accepted, men the Notification under reference viz, 253/82-CE will never apply, for the reason that the exemption conferred by Notification No. 253/82-CE is applicable only if bleaching, dyeing or printing is carried on in one premises (factory) and the calendaring in another premises (factory). If according to the department, bleaching/dyeing/calendaring are one integrated process and different premises where these activities are undertaken will therefore render these premises one factory, then no one will be able to comply with the proviso to Notification No. 253/82-CE and Notification will be rendered nugatory. All the units under reference are separate factories and are not the precincts nor the part of the same premises.
b) The various factors such as common management, common administration, common sharing of water, job work transactions amongst them, close relationship amongst the partners etc. including the so-called operational unity relied upon by the Collector are entirely irrelevant for the determination of the issue involved in the present case. These factors may be relevant to find out whether manufacturer is the same or not. In view of the above the facts referred to by the Collector are not relevant to decide as to whether the said units constitute one single factory or are different factories. The benefit of Notification Nos. 80/76-CE as amended and/or 253/82-CE cannot therefore be denied and we accordingly extend the same to the assessees.
15. The above findings are equally applicable to the other assessees as facts are almost identical except for a few minor differences which do not in any way affect or alter these findings.
16. In the result the appeals of the Revenue are dismissed while the appeals of the assessees are allowed. The cross-objections are also disposed of in the light of the above.