Customs, Excise and Gold Tribunal - Tamil Nadu
Commissioner Of Central Excise vs Madura Coats Ltd. on 16 February, 2006
Equivalent citations: 2006(107)ECC517, 2006ECR517(TRI.-CHENNAI), 2006(202)ELT327(TRI-CHENNAI)
ORDER P.G. Chacko, Member (J)
1. These three appeals arise before us pursuant to remand ordered by Hon'ble Supreme Court in Civil Appeal No. 2108-2110/1998. We have been directed to pass a reasoned order in the case. Ld. Collector (Appeals), whose order is under challenge in these appeals of the Revenue, held the respondents to be eligible for exemption under Notification No. 297/79-CE in respect of fabrics which they manufactured and cleared during the period of dispute. The Notification granted exemption from payment of additional excise duty leviable under Section 3 of the Additional Duty of Excise (Goods of Special Importance) Act, 1957 in respect of man-made fabrics falling under Chapter 54 or 55 of the Schedule to the Central Excise Tariff Act, 1985 when subjected to the finishing processes specified in the Table annexed thereto. The proviso to the main part of the Notification reads as under:
Provided that no such exemption shall apply if man-made fabrics, falling under the said Chapters 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 Table.
The table annexed to the Notification mentioned six processes, of which the sixth one arises for interpretation in this case and the same reads as under:
Hydro-extraction, that is to say, mechanically extracting, or mechanically squeezing out water from the fabric,
2. The issue arising for consideration is whether the process to which the respondents subjected their fabrics would fall within the meaning of "Hydro-extraction" as defined in the Table to the Notification and also whether any process other than those described in the said Table was also undertaken by the party. If it is found that "hydro-extraction" specified above was done on the fabrics in the respondent's factory and that no process other than those mentioned in the Table Annexed to the Notification was so done, the respondent will be held eligible for exemption under the Notification.
3. After examining the records and hearing both sides, we find that the case of the respondents is that the process of "can-drying" to which the grey fabrics were subjected to in their factory during the period of dispute is covered by "hydro-extraction" mentioned at Sl. No. 6 of the Table to the Notification. They have not contested the account of the process of can-drying given in the Revenue's memoranda of appeals. We extract this account of the process hereunder:
The man-made fabrics as processed by M/s. Madura Coats Ltd are subject to the process of can-drying. In the process of can-drying, fabrics are first passed through squeeze mangles and then passed through rollers in which steam is continuously passed. The water content of such fabrics gets evaporated while passing through the steam rollers. The fabrics are commercially known as can-dried fabrics.
According to ld. SDR, can-drying cannot be equated to "hydro-extraction". According to Shri S.S. Thakur, ld. representative of the respondent-Company, the process, which involves use of machines (squeeze mangles) for removal of water and also machines (rollers) for further drying of the fabrics, is very much a mechanical process fitting in the definition of hydro-extraction under the Notification. It is also submitted that "can-drying" does not amount to 'manufacture' under Section 2(f) of the Central Excise Act or 'any other process' mentioned under Heading 54.09. He also cites decisions touching the manufactural aspect.
4 Ld. SDR submits that entries in an Exemption Notification require to be strictly construed. Nothing can be added to the language used in such Notification, nor can anything be deleted therefrom. Therefore, it is argued, the term "hydro-extraction" which has been clearly explained as a purely mechanical process, cannot be understood in such a way as to include within it any process other than mechanical. In the present case, can-drying involves not only a mechanical process but also thermal. In this context, ld. SDR has usefully referred to a part of the literature placed on record on behalf of the respondents. This material is seen on pages 76 and 77 of the paper book filed on behalf of the respondents. Reference has also been made to a machine called "water mangle (rope wringing machine) described in this literature on page 70 of the paper book. As admitted by ld. representative of the respondents, "hydro-extraction" part of the can-drying process was undertaken by means of a water mangle. The literature says that this machine consists of two rollers tightly pressed together and rotating in opposite directions. The bottom roll is made of metal, while the upper one is of an elastic material of compressed cotton or coated with rubber. Pressure is applied by compound levers and weights or springs or by means of hydraulic or compressed air cylinders. The wet fabric is passed in between the rollers. While the rollers mechanically work, the fabric gets squeezed resulting in the removal (extraction) of most of the water contained therein. The literature on page No. 77 reads as under:
The removal of water from a wet fabric by mechanical means like mangling, suction and centrifugal force (in a hydroextractor) is a much more economical form of energy. However, there is a limitation of the mechanical method which cannot reduce the moisture content of a fabric, to say lower than 60% It appears from the above literature that water can be mechanically removed from wet fabrics by mechanical use of a water mangle only to the extent of 60%. In the process (can-drying) under consideration, fabric admittedly gets dried fully. The can-drying done by the respondents, as we have already noted, consists of a mechanical part viz. squeezing (mangling) as admitted by the respondents and a thermal part viz. drying, wherein steam is used. The first part removes water upto 60% and the second part removes the rest of the water. Thus, can-drying turns out to be a composite process consisting of both mechanical and thermal operations and cannot be considered as purely mechanical. 'Hydro-extraction' is a purely mechanical process as is apparent from the clear language used in the definition of the term in the Notification. Therefore, we are unable to accept the contention raised by the Company's representative that can-drying is the same as "hydro-extraction". Hence the respondents cannot claim the benefit of Notification No. 297/79-CE in respect of their 'can-dried' fabrics for the period of dispute. The impugned order indicates that ld. Collector (Appeals) examined the question whether "can-drying" done by the respondents was "any other process", i.e. any process other than the processes specified in the Table. He answered the question in the negative, thereby virtually holding that "can-drying" was a process specified in the Notification. This finding of the lower 'appellate authority defies the strict rule of construction of an exemption Notification. That apart, where it is found that the finishing process (can-drying) carried out by the respondents is not one of the processes specified in the Table annexed to the Notification, there is no question of looking into the proviso. The expression "any other process" is found only in the proviso.
5. The appeals of the Revenue succeed. The impugned orders are set aside and the appeals are allowed.
(Order dictated and pronounced in open court)