Customs, Excise and Gold Tribunal - Delhi
Japan Dyeing Works vs Collector Of Central Excise on 11 February, 1992
Equivalent citations: 1992(39)ECC22, 1992(61)ELT289(TRI-DEL)
ORDER G.A. Brahma Deva, Member (J)
1. This appeal arises out of and is directed against the Order-in-original No. 56/MP/89 dated 19-10-1989 passed by the Additional Collector of Central Excise and Customs, Vadodara.
2. The facts of the case, in brief, are that according to the Department, the appellants have manufactured/processed and removed the processed man-made fabrics valued at Rs. 2,78,138.75 Paise falling under Chapter/Sub-heading No. 5409 of the Central Excise Tariff Act, 1985 during the period from 19-12-1987 to 21-1-1988 from their factory by recourse to fraud, wilful mis-statement, suppression of facts and with a deliberate and wilful intent to evade payment of duty of excise amounting to Rs. 54,297.56 illicitly without obtaining any Central Excise Licence for such manufacture/process, without following the central excise procedure and without payment of central excise duty at the appropriate rate leviable thereon. The main charges against the appellants are that they have processed fabrics by Tapela process and calendering with aid of power would subject to man-made fabrics and is liable to central excise duty. The Additional Collector who adjudicated the proceedings dropped the first charge, i.e., Tapela Dyeing process on the ground that since the process is not undertaken with the aid of power and steam, it does not fall within the purview of Tariff description. As such, Tapela processed fabrics would be exempted from levy of central excise duty. As regards second issue, the contention of the applicant that they were not having calendering machines at the relevant point of time and calendering process, i.e., ironing with calendering machine having plain rollers does not amount to process of manufacture, was negatived by the Adjudicating Authority and held that since the applicants were subjecting the man-made fabrics to calendering with the plain rollers and also dyeing with Tapela Dyeing Process in the same premises, they would not be eligible for exemption from payment of duty in terms of Notification No. 297/79-C.E., dated 24-11-1979. Accordingly, he ordered for confiscation of 4941 Sq. Mtrs. processed man-made fabrics and since the same has already been released provisionally and not available for confiscation he ordered for appropriation of Rs. 5,000/- out of the cash security deposit. He confirmed the demand of duty amounting to Rs. 54,297.56 Paise, in addition to imposing penalty of Rs. 5,000/-under Rule 173Q of Central Excise Rules. Hence this appeal.
3. We have heard Shri Willingdon Christian, learned Advocate for the appellants and Smt. J.M.S. Sundaram, learned JDR for the respondent.
4. Shri Willingdon Christian submitted that process of calendering of fabrics with the help of plain rollers does not amount to manufacture and this issue was squarely covered by the decisions of the Supreme Court in the case of Mafatlal Fine Spinning & Mfg. Co. Ltd. v. Collector of Central Excise, reported in 1989 (40) E.L.T. 218 (S.C.) and same was followed by the Tribunal in the case of Siddheswari Cotton Mills (Pvt.) Ltd., Calcutta v. Collector of Central Excise, Calcutta, reported in 1989 (14) E.T.R. 343 as well as in the case of Bhartiya Textiles, Bombay v. Collector of Central Excise, Bombay-I, reported in 1991 (17) E.T.R. 387. Smt. J.M.S. Sundaram submitted that those decisions are not applicable to this case as they were held with reference to the old Tariff and issue relates to new Tariff in the present case, since substantial change has taken place in the relevant entry under the new Tariff. In view of this submission, the learned counsel for the appellants has chosen to address arguments on other aspects also. He said that ratio of the aforesaid decisions still holds good since there has been no change in the phraseology except the same definition was bodily lifted. On facts, he submitted that the appellant's firm was a proprietary concern owned by Shri Narottambhai C. Patel and not a partnership firm as it was alleged by the Department. One Mr. Kishan Chand B. Arora was the owner of calendering machine who had installed it in the adjacent premises of the appellant's unit having taken portion of the plot No. 46 on rent from the same landlord, and said Shri Arora was neither a partner nor related or concerned in any manner with the appellant's firm. He contended that appellant was neither a owner of the calendering machine nor he was in possession of the said machine during the relevant period. Further said machine was not there at the time of raid since that machine was given for repairs to M/s. Shiva Engineering & Welding Works by Kishan Chand Arora which is confirmed by repair bill and payment receipt that machine was with repairer during the period 18-11-1987 to 18-1-1988. The documents sale letter for having sold in favour of Krishan Chand, octroi receipt for bringing the machine from Bulsar into Surat Municipality Limit, repair bill, payment receipts, affidavit by the landlord for having let out portion of the premises to Kishan Chand B. Arora, and letters from the customers of the appellant confirming that they have received back the processed MMF only after Tapela Dyeing process and without calendering were produced by the appellants to prove that said calendering machine could not be operated by the appellant, But these were neither properly considered by the Adjudicating Authority nor cross-examined the concerned persons before rejecting them. He referred to decision of the Tribunal in the case of Shantilal U. Siroya v. Collector of Customs (Prev.), reported in 1989 (41) E.L.T. 144, in support of his contention. Further he argued that independent panch witnesses were not allowed to be cross-examined, though it was acceded to but no date was given for being cross-examined. He argued that burden is more on the Department to prove an offence and since this has not been done the impugned order is not sustainable even on merits.
5. Arguing for the respondent, Smt. Sundaram submitted that main issue relates to admissibility of exemption of additional duty on man-made fabrics in terms of Notification No. 297/79-C.E., dated 24-11-1979. This notification stipulates 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 processes specified in the Table. In the Table attached to this Notification, the process - 'calendering with the plain roller' has been specified and M/s. Japan Dyeing Works has subjected the fabrics to the calendering with plain rollers. Since they have also subjected the M.M.F. to Tapela Dyeing process in addition to calendering they would not be eligible for exemption from payment of duty. Since the calendering with plain roller has been specified in the Notification, it is clear from the wordings of Notification, process of calendering amounts to manufacture and Notification cannot be read as nugatory. She submitted that substantial change has taken place after amendment as it was specified in the Tariff entry and definition of manufacture was enlarged with reference to the respective tariff entry. It is not a case of bodily lifting and the decisions cited by the appellants are not applicable as they were held with reference to old Tariff. As regards evidence she said that Department was justified in arriving at the conclusion based upon the statement of appellant and panchnama drawn on 21-1-1988 that it was a partnership concern consisting of appellant and Shri Kishan Chand B. Arora, M/s. Krishna Calendering was not in existence at the time of seizure as the Municipal documents produced by them shows that they got registration from Municipal Corporation in the month of Feb. 1988 subsequent to the seizure. Calendering machine was not purchased in the name of the firm but in the name of individual and it is for the party to prove that two firms were in existence and same was not established. She said that subsequent evidences were cooked up and Adjudicating Authority was right in rejecting them and justified in holding that the appellant had calendering machine for calendering the fabrics in the factory premises of the appellant.
6. In reply, Shri Willingdon Christian submitted that Notification is not the guiding factor to decide the issue whether particular commodity is excisable or not or it amounts to manufacture but it should be determined by the definition of manufacture used in the Excise Act as it was held by the judicial pronouncements. He said that statement of appellant cannot be relied upon as it was retracted and burden lies on the Department to prove whether it was an ownership or partnership at the time of seizure with the independent evidence. He contended that appellant had no power connection and this important piece of evidence was also not considered by the Department before arriving at the conclusion that goods were processed with the aid of power.
7. We have given our anxious consideration to the arguments advanced on both the sides and perused the records. The contentions of the appellant's counsel are of two fold. First the appellant was not having a calendering machine for calendering process and irrespective of that calendering process has been done on the fabrics with the plain roller which cannot be called as process of manufacture under Section 2(f)(ii) of the Central Excises and Salt Act, 1944 with reference to sub-heading 5409 under Chapter 54 to the Central Excise Tariff Act, 1985. First we shall deal with the issue whether process of calendering amounts to manufacturing process in terms of amended provisions and Central Excise Tariff Act. Section 2(f) of the Central Excises and Salt Act, 1944, Heading 54.09 of Central Excise Tariff Act, 1985 and Notification No. 297/79-C.E., dated 24-11-1979 are relevant to decide the issue and they are reproduced as under :-
"2(f) 'manufacture' includes any process, -
(i) incidental or ancillary to the completion of a manufactured product; and
(ii) which is specified in relation to any goods in the Section or Chapter Notes of Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture;
and the word 'manufacture' shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account."
"54.09 5409.00: Fabrics of man-made filament yarn (including fabrics obtained from materials of heading Nos. 54.06 and 54.07 but excluding fabrics covered under heading No. 54.12), -
(a) Woven on looms other than handlooms, and
(b) Subjected to the process of bleaching, dyeing, printing, shrink-proofing, tentering, heat-setting, increase resistant processing or any other process or any two or more of these processes with the aid of power or steam."
Notification No. 297/79-C.E. "In exercise of the powers conferred by sub-rule (1) of Rule 8 of Central Excise Rules, 1944, read with sub-section (3) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Centra! Government hereby exempts man-made fabrics, falling under Chapter 54 & 55 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), when subjected to the finishing processes specified in the Table hereto annexed from the whole of the additional duty of excise leviable thereon under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957):
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
Sr. No. Description
(1) (2) ___________________________
1. Calendering with plain rollers.
2. ...."
Section 2(f) of the Central Excises and Salt Act, 1944 contains a definition of the word 'manufacture'. But actually this section does not define the word 'manufacture' or manufacturer but only lays down an inclusive definition. Therefore, the word 'manufacture' for the purpose of Central Excise has to be construed in its natural and plain meaning, but it shall also include any process incidental or ancillary to the completion of a manufactured product. After its amendment in 1986, the extended meaning was introduced providing that any process specified in relation to any goods in the Section or Chapter Notes of Schedule to the Central Excise Tariff Act, 1985, would also amount to manufacture. The original definition of 'manufacture' had been enlarged from time to time so as to include within its ambit various specified processes in relation to goods and but for these amendments with an intention of legislation in enlarging the meaning and scope of manufacture, the processes adverted to therein and brought within the inclusive definition thereof would not have by themselves constituted. Thus when Parliament has itself by way of Tariff entries treated a particular process as manufacture, such process or stage will amount to manufacture. Except these, in all other cases, the definition of the word 'manufacture' would mean making and bringing into existence an article or product by physical labour or power and would include any process incidental or ancillary to the completion of a manufactured product. But, mere labour bestowed on an article even if such labour is applied through machinery will not make it a manufacture unless it has progressed so far that a transformation ensues, and the article becomes commercially known as another and different article. Calendering is not one such process specifically included within the ambit of the definition of manufacture. Supreme Court had already taken the view that though calendering is finishing process but not manufacturing process in the case of Mafatlal Fine Spinning and Mfg. Co. Ltd. (supra) and further held that process of manufacture is one which imparts a change of a lasting character either by adding chemical or otherwise, in the case of Siddheswari Cotton Mills (Pvt.) Limited, Calcutta v. Union of India, [1989 (39) E.L.T. 498 (SC)]. Next question arises whether process of calendering amounts to "any other process" referred to in the sub-heading 5409 of the CET. This question was precisely answered by the Supreme Court in the case of Siddeshwari Cotton Mills (Pvt.) Limited [1989 (39) E.L.T. 498] that while dealing with the same issue and interpreting the scope of 'any other process' under Section 2(f)(v) of the Central Excises and Salt Act, 1944. Prior to amendment Section 2(f)(v) was similarly worded to sub-heading 5409(b) of CET. Section 2(f)(v) reads as under :-
"2(f)(v): in relation to goods comprised in Item No. 19-1 of the First Schedule includes bleaching, mercerising, dyeing, printing, water-proofing, rubberising, shrink-proofing, organdie processing or any other process of any one or more of these processes;"
In the said case, Supreme Court held that:-
"The expression 'any other process' in Section 2(f)(v) of the Central Excises and Salt Act, 1944 cannot be considered ejusdem generis, so as to partake of the nature, and character of the process and those belong to the same genus. The expression 'bleaching, mercerising, dyeing, printing, waterproofing, rubberising, shrink-proofing, organdie processing' which precede the expression 'or any other process' in Section 2(f)(v) contemplate processes which impart a change of lasting character to the fabric by either the addition of some chemical into the fabric or otherwise. 'Any other process' in the section must, share one or the other of these incidents. The expression 'any other process' is used in the context of what constitutes manufacture in its extended meaning." ...
Further it observed that the expression ejusdem generis...'of the same kind or nature'------signifies a principle of construction whereby words in a statute which are otherwise wide but are associated in the test with more limited words are, by implication, given a restricted operation and are limited to matters of the same class or genus as preceding them. If a list or string or family of genus - describing terms are followed by wider or residuary or sweeping-up words, then the verbal context and the linguistic implication of the preceding words limit the scope of such words. The principle underlying this approach to statutory construction is that the subsequent general words were only intended to guard against some accidental omission in the objects of the kind mentioned earlier and were not intended to extent to objects of a wholly different kind. This is a presumption and operates unless there is some contrary indication. But the preceding words or expressions of restricted meaning must be susceptible of the import that they represent a class. If no class can be found, ejusdem generis rule is not attracted and such broad construction as the subsequent words may admit will be favoured. The preceding words in the statutory provision, which, under this particular rule of construction, control and limit the meaning of the subsequent words must represent a genus or a family which admits of a number of species or members. If there is only one species it cannot supply the idea of genus."
With these observations Supreme Court had remitted the matter to the Tribunal for proper rule of construction to be applied in the understanding of the expression 'any other process' in Section 2(f)(v) and to consider whether the particular process of calendering adopted by the appellant would satisfy that requirement. On remand, the Tribunal held that the process of calendering applied to cotton fabrics did not amount to 'any other process'. Since sub-heading 5409(b) of the CET is pari materia to the old Section 2(f)(v) of the C.E.A. and even on facts calendering was done with a calendering machine having plain roller and roller not having engraved bowls, the ratio of the aforesaid decision is clearly applicable to the facts of this case. We do not agree with the contention of the Departmental Representative that exemption Notification is the guiding factor to interpret the term 'manufacture' since calendering with plain rollers was used in the said notification. The term 'manufacture' either in the tariff entry or in any Notification has to be interpreted on the basis of its definition in the present Statute. What was not in the main definition of term 'manufacture' cannot be substituted or entered in the Tariff entry or in the Notification. Since we have taken the view that calendering was not specified in the Tariff Entry and 'any other process' does not include process of calendering and, as such, calendering does not amount to manufacture. We do not feel it necessary to go into other issues raised by both sides.
8. In the result, we set aside the impugned order, and, accordingly, the appeal is allowed.