Customs, Excise and Gold Tribunal - Delhi
Commissioner Of C. Ex. vs Shital International on 21 August, 2002
Equivalent citations: 2002(146)ELT113(TRI-DEL)
ORDER G.R. Sharma, Member (T)
1. Revenue has filed this appeal being aggrieved by the order passed by the ld. Commissioner (Appeals) holding "that process carried out by the appellant does not amount to manufacture and this does not attract duty. Knitted Pile Fabric of man-made textile fabrics (Artificial Fur Lining) being manufactured by the appellant is thus correctly classifiable under heading 6001.12 as unprocessed. Impugned order is set aside." Since the issue was broadly covered by a number of decisions, pre-deposit of duty was dispensed and with the consent of both the parties, the appeal itself was heard.
2. The facts of the case in brief are that the respondents herein are engaged in the manufacture of Knitted Fabric of man-made Textile material (Artificial Fur Lining) classifiable under Chapter Heading 6001.12.
3. On scrutiny of the records, Central Excise Officers observed that the assessee had declared Knitted Pile Fabrics/Fur Fabrics under Chapter sub-heading 6001.12 as dutiable and had paid Central Excise Duty on this item up to 30-9-2000. They, however, issued a letter on 3-10-2000 and filed a revised declaration on 1-10-2000 declaring that the fabric was unprocessed and were chargeable to Nil rate of duty in terms of Notification No. 6/2000-C.E., dt. 1-3-2000 as also attracting Nil rate of duty under Notification Nos. 9/96 and 18/96. A SCN was issued to the assessee/respondent in this case asking them to explain as to why the fabric manufactured by them should not be treated as processed fabric and why should not be assessed to duty.
4. In reply to the SCN, the assessee (respondent herein) submitted that they were manufacturing unprocessed Knitted Fabric known as Fleece Fabrics, Fur Fabrics and Knitted Sliver Pile Cloth and that the process included carding, Knitting, Shearing & Cropping and Backcoating. It was submitted that Backcoating with chemical was done which was dried naturally or by pressing through the drier for drying the chemicals. It was submitted that Backcoating was done only on 0.05% of the fabric. The emphasis of the respondent herein was that the fabric manufactured by them was not processed fabric which attracted duty but was unprocessed fabric which attracted Nil rate of duty. It was contended by them that the process employed to the grey fabric did not bring about any change so as to make it processed fabric. In support of this contention they placed reliance upon the Hon'ble Supreme Court decision in the case of Mafatlal fine Spinning & Mfg. Co, Ltd, reported in 1989 (40) E.L.T. 218 and the Tribunal decision in the case of Maharashtra Fur Fabrics reported in 1994 (71) E.L.T. 857 and Versatile Enterprises reported in 2001 (130) E.L.T. 770 (T) = 2000 (91) ECR 723 and stated that in view of the above, the process carried out by them did not make the knitted long pile fabric as processed and they were entitled to exemption from payment of duty under Notification No. 6/2000-CE., dt. 1-3-2000. Ld. Commissioner (Appeals) allowed the appeal of the assessee as indicated above.
5. Arguing the case for Revenue Shri Atul Dikshit, ld. DR submits that Central Board of Excise and Customs in their Circular No. 14/Knitted fabrics/89/CX. 1, dt. 16-10-1989 while clarifying the process of manufacture observed that the Knitted fabric is subjected to a process of backcoating and shearing; that in this process of backcoating, the backing yarn is given a light coating of acrylic emulsion to fasten the fibre held in the yarn loop. The acrylic emulsion is water based and hence the fabric has to be dried for which it is passed through hot air stenter. After drying, the excess height of the loop is cut by the shearing machine and finally lustre is given by electrifying polish. It has further been clarified that since knitted pile fabrics is subjected to a process of Backcoating, Shearing and Electrifying polish and other processes discussed above it is clear that the said fabric is a processed fabrics.
6. Ld. DR submits that in view of the above clarification given by the Central Board of Excise and Customs, the backcoating, shearing operations undertaken by the respondents herein are a process and therefore, the fabric was processed fabrics. Ld. DR, therefore, submits that the ld. Commissioner (Appeals) has erred in holding that the operations undertaken by the respondents herein did not amount to processing.
Ld. DR submits that the ld. Commissioner (Appeals) relied on the judgment of the Tribunal in the case of Maharashtra Fur Fabrics Ltd. He submits that this judgment was interpreting Notification No. 109/86. He submits that this notification was rescinded by Notification No. 71/95 on 16-3-1995.
He submits that present period is much after 1995 and that the Notification No. 109/86 was not the same as the present Notification No. 6/2000.
7. Ld. DR submits that a lot of reliance has been placed on the decision of the Apex Court in the case of Mafatlal Fine Spinning & Mfg. Co. Ltd. He Submits that reliance has been placed on the observations of the Apex Court in this case in paras 10 and 12. He submits that para 11 has been omitted altogether. Ld. DR submits that in the first sentence in Para 11 of the Apex Court judgment it has been observed "These matters depend on particularities of the facts of each case and are to fee decided on a case by case basis"
Ld. DR submits that the facts of the present case are different and therefore, ill the decisions cited by the ld. Commissioner for coming to the conclusion are based on the facts of the case and that the facts of the present case are different. Ld. DR, therefore, submitted that since shearing and back-coating was undertaken by the appellant, this was a process and therefore, fabrics can rightly be called as processed fabrics. He, therefore, prays that the appeal may be allowed.
8. Shri M.C. Shekher, ld. Sr. Counsel with Shri K.J. Singh, ld. Advocate submits that the issue is covered by number of decisions of this Tribunal. He submits that the Tribunal in the case of Oswal Industries Pvt. Ltd. reported in 1990 (49) E.L.T. 305 held that the process of shearing or cropping carried out on knitted acrylic fabrics not being manufacture, eligible for exemption under Notification No. 109/86-C.E, dt. 27-2-1986. Ld. Sr. Counsel submitted that in the case of Maharashtra Fur Fabrics Ltd. reported in 1994 (71) E.L.T. 857 this Tribunal held that backcoating (with acrylic emulsion) of base fabric of silver knitted fabrics (commercially known as pile fabrics or synthetic fur fabrics) in stretched condition of a specially designed machine and thereafter passing the fabrics through hot air chamber to let water from emulsion evaporate is not treated as processed fabrics, Ld. Sr. Counsel further submitted that the matter was again examined in the case of Versatile Enterprises Pvt. Ltd. reported in 2001 (130) E.LT. 770 and it was observed that backcoating of the fabric With acrylic emulsion, shearing or cropping and electrifying polish undertaken by appellants are integral processes for the manufacture of knitted fabric Fabric continued to be unprocessed (grey) after such processes.
9. Ld. Sr. Counsel also drew our attention to the decision of this Tribunal in the case of Dhanlakshmi 'B' Mills Ltd. reported in 1999 (112) E.L.T. 149 and stated that in this cage this Tribunal held that fabrics remain unprocessed. after shearing. Ld. Sr. Counsel therefore, submitted that in view of the above decisions including that of the Apex Court the fabrics manufactured by them remained unprocessed even after shearing, cropping or back coating and therefore, were eligible to the benefit of Notification No. 6/2000 and prayed that the impugned order may be upheld.
10. We have heard the rival submissions. We have perused the evidence on record as also the case law cited and relied upon by both the sides. We agree with the contention of the ld. DR that each case is to be decided on the basis of its facts. Here we are concerned as to whether the operations of shearing, cropping and back coating undertaken by the respondents herein amount to processing of the fabric or not. We note that the ld. Sr. Counsel for the respondents brought to our notice a number of decisions of this Tribunal together with a decision of the Apex Court in the case of Mafatlal Fine & Spinning Mfg. Co. Ltd. wherein it has specifically been held as on overleaf :-
"12. In the present cases, the claim of the appellant before the authorities that the calendering process employed by them was such as to give temporary finish by pressing the fabric is not controverted. No lasting change is brought about. There is no finding to the contrary. Likewise the claim as to the "Shearing" which was only to trim protruding, stray fibres from the fabrics. If these are the nature of the operations, the grey fabric in the facts of these cases, does not become new and commercially different commodity and cease to be 'grey' cloth".
11. Having regard to the various case law cited by the ld. Sr. Counsel for the respondent herein, we note that the matter is squarely covered by the decisions cited by the ld. Sr. Counsel. Following the ratio of those decisions, we do not see any reason to interfere with the impugned order. The impugned order is, therefore, upheld and the appeal filed by Revenue is rejected. The stay petition is also disposed of in the above terms.