Customs, Excise and Gold Tribunal - Tamil Nadu
M/S. Super Associates And M/S. Superfil ... vs Commissioner Of Central Excise, ... on 27 April, 2001
Equivalent citations: 2001(76)ECC294
ORDER
Shri. S.L. Peeran (Oral)
1. Both these appeals arise from common adjudication order passed by the Commissioner of Central Excise, Chennai-II Commissionerate by his Order-in-Original No. 2/99 dated 3.6.99 confirming duty demand of Rs. 59,22,148/- on M/s Super Associates under Rule 9(2) of Central Excise Rules, 1944 read with proviso to sub-section (1) of Section 11A of Central Excise Act, 1944. There is confirmation of interest on the duty in terms of Section 11AB of the C.E. Act, besides penalty of Rs. 11,59,886/- on M/s. Super Associates under Sec. 11AC of C.E. Act. There is further penalty of Rs. 1 lakh on them under Rule 173Q (1) of C.E. Rules. Penalty of Rs. 50,000/- on M/s. Superfil Products under rule 209A of C.E. Rules has also been imposed. Hence, both the parties have filed these appeals for setting aside the order on the ground that conversion of nylon filament yarn and polyester filament yarn into multi folded yarn prior to the introduction of chapter note 3 to Chapter 54 introduced by Finance Act, 1995 was not dutiable as it did not amount to a process of manufacture. There are large number of judgements to this effect that process of multi folding single yarn i.e. doubling the yarn does not amount to a process of manufacture. However, after the introduction of note 3 to chapter 54 by Finance Act, 1995 in the Central Excise Tariff Act, the said multi folded yarn was considered as a process of manufacture. It is the appellant's case that as the yarn cleared for manufacture of fabrics, the same was exempted in terms of serial no. 1 of notification 35/95-CE dated 16.3.95 which exempts Central Excise duty in respect of description of goods falling under chapter heading 51, 52, 54 or 55 if the description of the goods is 'yarn' (other than sewing thread), double or multifold including cabled yarn. The condition in column 5 is given as-
"If the yarn is,-
(i) meant for use in the manufacture of fabrics; and (ii) manufactured out of yarn falling within chapters 51, 52, 54 or 55 of the said Schedule on which the appropriate duty of excise under the said Schedule, or as the case may be, the additional duty leviable under the Customs Tariff Act, 1975 (51 of 1975), has already been paid."
2. It is the claim of the appellants that they have been receiving duty paid single yarn for the purpose of multi folding form M/s. Superfil Products Ltd., on job work basis and after multifolding the same, it was returned to M/s. Superfil Products Ltd., who, in turn, cleared the same to M/s. Dinesh Mills Ltd., and M/s. Porritts & Spencer (Asia) Ltd., and later converted the same by a process of injecting the woolen and the process is known as "needle punching". The product that comes out after this process is known as "felts" which is also a fabric for industrial purpose and is classifiable under chapter sub-heading 5911.30 as 'textile fabrics and felts, endless or fitted with linking devices of kind used in paper-making or similar machines (for example, for pulp or asbestos-cement). The main contention of the appellants has been that notification used the words " meant for use in the manufacture of fabrics" which arises even at the first stage which is manufactured by process of warp & woof cotton. It is on this product that woolen is injected by means of a process already described to bring into existence the final product "felt". The felt is duty paid and the intermediary product i.e. fabric not being in marketable condition is not discharging duty. The main contention is that so long as the accessories under the said headings are cleared for manufacture of fabric which in turn has been used in the manufacture of felt which is nothing but fabric itself exempted under the notification cannot be denied.
3. It is stated that appellant had brought to the notice of the department about the manufacture of multifolded yarn on job work basis by receiving the single yarn from M/s. Superfils Products Ltd. There is reference to letter dated 25.11.91 from M/s. Superfils Products ltd., manufacturers of single yarn/monofilament yarn to Superintendent of Central Excise requesting him to confirm that twisted or folded yarn are exempt from Excise Duty vide Notification No. 52/91 if manufactured out of duty paid single yarn. Letter dated 9.3.93 from M/s. Superfil Products Ltd. to the Superintendent Central Excise was also addressed pointing out to new notification No. 31/93 dated 28.3.99 and requesting him to confirm the same. Further, a reference is made to letter dated 1.4.94 from M/s. Superfil Products Ltd. Further reference is made to letter dated 1.4.94 from M/s. Superfils Products to Superintendent of C.Ex., to inform him that they intend to send single yarn to another unit M/s. Super Associates with intention to carry on the process of twisting on job work basis and return to their factory under Rule 57F (2) of C.E. Rules. On the same date, M/s. Superfils Products Ltd. filed classification list for twine made from monofilament yarn under sub-heading 5607.00 at NIL rate of duty under Notification No. 62/87-CE dated 1.3.87 and amended by notification No. 148/89-CE dated 1.6.89 which had been duly approved by the ACCE.
4. M/s. Super Associates also vide their letter dated 13.12.95 to Superintendent of C.Ex., informed him that they have commenced the job work of multi folding of yarns supplied to them by customers after payment of duty. The said letter was acknowledged on 25.1.96 by the Superintendent and informed them that according to chapter note 3 of chapter 54 operation of twisting / multifolding amounts to "manufacture". Therefore, the job workers was required to pay duty.
5. However appellants being aware of the provisions of notification No. 35/95 dated 16.3.95 exempting the yarn (double or multifold including cabled yarn) meant for use in the manufacture of fabrics was exempted, therefore, they did not file any classification list and pay duty. It is their contention that if an item is exempt by notification, there was no necessity for them to follow the procedure or pay duty. Therefore, they did not comply with the directions given by the Superintendent by his letter dated 25.1.96. It is appellants' case that Superintendent of C.Ex on being confirmed by the appellants about their stand, did not take any action and that department was fully aware of the activity of appellants M/s. Super Associates' converting single yarn into multifold yarn and clearing the same to M/s. Superfils Products who were, in turn, selling to M/s Dinesh Mills and M/s. Porritts & Spencer (Asia) Ltd., for the purpose of manufacture of fabrics and converting into felts. Therefore, there was no suppression in the matter and hence SCN issued after lapse of time of 25/5/98 by Commissioner of C.Ex., invoking proviso to section 11A (1) to demand for five years i.e. from 23.2.95 to 5.6.95 is clearly barred by time as there was no suppression of facts in the matter. It is further contended that multifolded yarn was subjected to duty only by introduction of chapter note 3 to chapter 54 wherein it was described that process of doubling or multifolding amounts to process of manufacture by amendment to Central Excise Tariff Act on 26.5.95. Therefore, question of confirming any duty from 23/3/94 till introduction of note 3 to chapter 54 on 26.5.95 does not arise.
6. It is pleaded the appellants that issue is no longer re integra and the issue of felt being considered as fabrics was examined in as for back as 1980 by the Apex Court in the case of DELHI CLOTH & GENERAL MILLS CO. LTD. Vs. State of Rajasthan & Others - 1980 ELT 383 (SC) wherein the expression of 'Fabric' was held to cover" all textiles, no matter how constructed, how manufactured, or the nature of the material from which made". The Expression "textile fabric" was held to include the following varieties, bonding, felted, knitted, braided and woven. The most important citation relied by the appellant to strongly plead that the matter is covered in their favour is the decision of PORRITS & SPENCER (ASIA) LTD. Vs STATE OF HARYANA- 1983 ELT 1607 (SC) wherein the aspect pertaining to "Dryer felts" produced by weaving according to warp and woof pattern is considered. The Apex had gone in great detail on this aspect of the matter and had clearly held that woven fabrics have been held to fall within the ordinary meaning of the word "textiles". It was also held that "dryer felts" which are "woven textile felts... of a kind commonly used in paper making machinery" are regarded in common parlance, according to the sense of ordinary traders and merchants, textile fabrics. Appellants further relied on the judgement of M/s. MYSORE PAPER MILLS LTD. Vs CC Madras - 1992 (39) ECR 110 (T) wherein the term "woven textile fabrics whether or not felted" was examined and the Tribunal held that it is "textile fabrics" for classification purpose in terms of Rule 4(a) (iv) of chapter 59 of the Customs Tariff Act under heading 59.16/17 and that it would include even fabrics such as felts which are not necessarily woven in the conventional manner using both warp and weft. It was held that for these reasons "press felts" in question are admittedly use in paper making machines and were held to be classifiable under 59.16/17 of the Customs Tariff Act, 1975. Therefore, it is their plea that it is clearly a fabric and chapter 59 also deals with "textile fabrics". A reference is made to the clarification given by the Boards' Circular No. 198/32/96-CX dated 19.4.96 wherein the expression "Manufacture of fabric" will include, in addition to weaving, the processes like knitting, crocheting, embroidering etc. It was also explained that even after embroidery the nature of fabrics does not change. The embroidered fabrics are also subsequently subjected to the process of bleaching dying etc. As such yarn used for embroidery cannot be said to have not been used in the manufacture of fabrics. Therefore, the Board clarified that use of said yarn for embroidery of fabrics will be covered by the expression "manufacture of fabrics" for the purpose of notification No. 35/95 dated 16/3/95. Appellants contend that this clarification would apply to even to the multifold yarn cleared by Superfils Products ltd. to the two units referred to, who manufactured fabrics and felts.
7. Appellants rely on the definition of the term "fabric" appearing in the Dictionary of Fibre and Textile Technology published by Hoechst Celanese at page 57 which defines 'fabric' as "A planar textile structure produced by interlacing yarn, fibre, or filaments." The same dictionary defines the terms of 'felt' and 'felting' as below:-
FELT:1. A non-woven sheet of matted material of wool, hair, or fur, sometimes in combination with certain manufactured fibres, made by a combination of mechanical and chemical actin, pressure, moisture, and heat 2. A woven fabric generally made from wool but occasionally from cotton or certain manufactured fibres, that is heavily shrunk and fulled, making it almost impossible to distinguish the weave.
FELTING:1. The process of exposing wool fibres alone or in combination with other fibres to mechanical and chemical action, pressure, moisture, and heat so that they tangle shrink, and mat to form a compact material. Felting is generally carried out in a fulling mill. (Also see FULLING).
2. See NEEDLE PUNCHING and NEEDLED FABRICS.
The term needle punching is also defined as "the process of converting batts or webs of loose fibres into a coherent non-woven fabric on a needle loom (q.v.). The definition of 'Embroidery' is given as "ornamental designs worked on a fabric with threads. Embroidery may be done either by had or by machine".
8. With regard to time bar, the appellants contend that as they were very clear in their mind and held bonafide belief that the yarn manufactured by them was meant for fabrics and not for any other use, therefore, it was exempted from the notification and hence for holding bonafide belief larger period cannot be extended in terms of following judgements :-
1) PADMINI PRODUCTS Vs CCE-1989 (43) ELT 195 (SC)
2) PUSHPAM PHARMACEUTICAL COMPANY Vs CCE Bombay-1995 (78) ELT 401 (SC)
3) TAMIL NADU HOUSING BOARDS Vs CCE Madras-1994 (74) ELT 9 (SC)
9. They further contend that department was also aware of appellants' manufacturing the multifold fabric by receiving single yarn from M/s. Superfils Products Ltd. and there was correspondence from the appellants as well as from M/s. Superfils Products Ltd. from 1991-96. Therefore, the issue of SCN in the year 1988 is clearly barred by time as there was no suppression to invoke larger period in the matter.
10. Ld. Counsel Shri S. Ignatius argued on the basis of above grounds and relied on the judgement of the already cited and elaborated this case on the basis of material and records produced by appellants.
11. On the other hand Ld. DR Shri S. Kannan defended the order by submitting that appellants had not taken out a licence and informed the department about the use of the yarn in the manufacture of fabric. What was manufactured was felt and felt cannot be considered as fabric. In this connection, he referred to judgement of FILTER & CO. and OTHERS Vs CCE reported in 1986 (24) ELT 114 (SC) which clarified that fabric and felt are two separate entries and they are recognised as separate products. Its manufacturing process is different and so also its marketing pattern. Therefore, to say that fabric and felt are same is not correct. He submits that there is no dispute about fabric and felt being textile but textile is a generic terms of these two term and its spices. The notification applies only to one species i.e. fabric and felt being separate commodity is not covered by the notification. He referred to pages 228 & 229 of Words & Phrases by Sarkar which defines "felt". It is manufactured without a process of waving and submits that for the purpose of fabric, weaving is necessary. Therefore, he submits that appellants were clearing the items as Twine and not as Yarn. He submits that fabrics excludes impregnation. In felt, there is impregnation. Hence, it is not a fabric. This Felt being not being fabric, it has crossed the stage of fabrics and hence does not recognise as felt. He referred to pages 273 of Words and Phrases of Sarcar which defines the term 'fabric' as woven material textile and weaving and essential feature of fabric. he submits that the judgements cited by the Counsel were all distinguishable and so their arguments and the Board's circular referred to by them. He took us through chapter note 2 chapter 56 which defines 'felt' as well as to chapter 59 which deals with textile fabric which included woven fabric of chapter 50 to 54. he referred to HSN at page 901 wherein the textile fabric referred to felt also. However, on this aspect of the matter, there is no discussion by the Commissioner and thus cannot be taken as material fact for considering the terms of the notification. He point out the terms of notification should be strictly construed. As appellants had not informed the department about the clearances by appellants to M/s. Superfils Products, who, in turn did not inform the department about clearances to M/s. Dinesh Mills and M/s. Porritts & Spencer (Asia) Ltd. Therefore, there was clear case of suppression and hence larger period was invocable. From the facts, there was some correspondence between the parties and the Superintendent that did not put the matter in clarity and it cannot be said that department had all the information to proceed to issue the show cause notice well within the time. Ld. Counsel in reply submitted that judgement of FILTER & CO. & OTHERS Vs CCE was clearly distinguishable as the question with regard to classification of fabric and felt under two different entries and not to consider them as textile fabrics and so also definition of 'felt' & 'fabric' referred to from page of Words & Phrases of Sarcar. He points out that even in terms of chapter 2 to chapter 56 and definition of 'textile fabric' appearing in chapter 59 and at page 901 of Hsn explanatory notes, it is very clear that felts were covered within the definition of 'fabrics' and hence appellants have made out their case. He submits that judgement cited by him conclusively establishes the appellants case and hence demands & penalties are required to be set aside.
12. We have carefully considered the submissions made by both sides and have perused the entire material on record including the citations, tariff notes, HSN explanatory notes and the extracts from the textile dictionaries and from Words & Phrases on Excise and Customs by H.B. Sarcar. The main contention of the appellants has been that they have a strong case both on merits as well as on time bar in the matter. Reference was made by Ld. Advocate to the stay order No. 1610-1611/99 dated 12.10.99 by which the Bench, after noting the very arguments had observed that appellants have made out a strong case both on merits and on time bar. As we notice from the impugned order, that the arguments which have been recorded and noticed in this case, do not have appear to have been addressed before the Commissioner and the Commissioner in the impugned order has not dealt with in great detail in a judicious manner and with a clear mind and has not appreciated the issue in the light in which it has to be addressed. The order appears to have been passed in a haste with pre-determined mind to confirm the duty. Normally, an adjudicating authority ought to address the defence raised by the appellants with greatest scrutiny and care and record his findings without prejudging the issue. This will be in keeping with the principles of natural justice and it is now well settled that however lengthy an order may be and if it is colourable, with capric and bias, and having been passed without taking into consideration the citations referred to or the tariff notes, besides the exemption notification having not been analyses, then such an order is not a speaking order and requires to be set aside. We are of the considered opinion that the Ld. Commissioner has himself fundamentally erred in not referring to the citations which were placed before him and also has not given a conscious thought to all aspects pertaining to grant of benefit of notification available to yarn double or multifold "(i) which is meant for use in the manufacture of fabrics; and (ii) manufactured out of yarn falling with Chapter 51, 52, 53, 54 or 55 of the said Schedule on which the appropriate duty of excise under the said Schedule, or as the case may, the additional duty leviable under the Customs Tariff Act, 1975, has already been paid."
13. It is the case of the appellants that they are only carrying out the activity of job work on receipt of single yarn which is exempted from duty from M/s. Superfils Products ltd. who have felt the classification list and have supplied the single yarn, by following the procedure under Rule 57F (2) and the said yarn was returned to M/s. Superfils Products. They have cleared the same to two of their customers namely M/s. Porritts & Spencer (Asia) Ltd and M/s. Dinesh Mills Ltd., in turn, who have utilized initially in the manufacture of fabrics which was converted into 'felts' by process of needling. The attention was drawn to the Commissioner that there was correspondence on this aspect from 1991 till the date of issue of SCN and the department was fully aware of the matter and in such circumstances, in the light of several Supreme Court judgements, suppression would not arise. The Ld. Commissioner's finding by merely holding that they had ulterior motive in clearing the goods and hence larger period is attracted does not hold much water. The question that arises is not about the ulterior motive but appellants' holding a bonafide belief in the light of this notification that the item is exempted and in the light of several Supreme Court judgements noted by the Ld. Commissioner. It is stated by appellants that they had correspondence from 1991 and hence entire duty demands would be time barred; if the department has full knowledge of manufacture and clearance by both the units of the appellants then the matter requires to be re-looked afresh in the light of submissions made by them.
14. Appellants' contention is that the questing of raising duty on them does not arise as "doubling of yarn" does not amount to 'manufacture' till the date of passing of Finance Bill is a well settled issue. If this be the position, then the Ld. Commissioner has committed an error in confirming duty till the date on which the tariff note 3 of chapter 54 was introduced. Be that as it may, the Appellants having received single yarn for the process of doubling, according to them, from M/s. Superfils Products under Rule 57F (2) on job work basis and returned the same under cover of documents, therefore a question of raising demand on them would not arise, if this contention is accepted. There has to be a specific findings to be recorded on this aspect of the matter. In the absence of original records and verification of this fact, the Tribunal is handicapped to give any finding on this aspect of the matter. Therefore, we are of the considered opinion that this issue is required to be remanded at this stage itself for the purpose of reconsidering this aspect of the matter.
15. The next contention raised by the appellants is that Superfils Products Ltd., who were supplying the single yarn for the purpose of doubling had paid duty on the yarn ad cleared the same to M/s. Porritts & Spencers and M/s. Dinesh Mills Ltd. who have given two certificates to that effect which are extracted herein below:-
TO WHOM SOEVER IT CONCERNS We certify that Nylon Monofilament yarn 2/2/3 being bought from Superfil Products ltd., 2-C, First Floor, Habibullah Road, T.Nagar, Chennai - 600 017, is used a our end in the manufacture of Paper Maker Felts which falls under Tariff item No. 5911.30 of Central Excise Tariff. This Tariff item reads as follows:
"Textile Fabrics & Felts, endless or fitted with linking devices, of a kind used in paper making is similar machines (for example, for Pulp or Asbestos cement."
for Porritts & Spencer (Asia) Ltd.
A.K. Suri Manager - Commercial TO WHOM SO EVER IT MAY CONCERN WE HEREBY DECLARE AND CERTIFY THAT 0.20MM 330 DENIER NATURAL NYLON 6 MONOFILAMENT SYN YARN BEING RECEIVED BY US FROM M/S. SUPERFIL PRODUCTS TLD. NO. 2-C, FIRST FLOOR, HABI BULLAH ROAD, T.NAGAR, MADRAS - 600 017, ARE USED AS RAW MATERIAL FOR OF OUR PRODUCT NAMELY FELTS, ENDLESS OR FITTED WITH THE LINKING DEVICES, AN INDUSTRIAL FABRIC FALLING UNDER CH/SUB HEADING NO:5911-30.
(A.N. PATHAK) RAW MATERIAL PURCHASER SUPTD.
16. The above evidence indicates that nylon monofilament yarn is not 'Twine' as argued by the Ld. DR and his argument based on the findings of the Ld. Commissioner is not justified. The Ld. Commissioner himself has, in his finding portion, clearly laid down that appellants were converting 330D nylon monofilament yarn to 330D multifilament yarn. When he has arrived at this finding, it is difficult to accept Ld. DR's arguments that appellant had cleared the product as 'twine' and as held by Ld. Commissioner in para-4. It is also very difficult to accept ld. Commissioner's finding as it is contradictory to his own findings and the allegations made in show cause notice that appellants were doing the conversion work of monofilament yarn into multifolded yarn. Such a contradictory findings are not acceptable and requires to be set aside for the purpose of reconsideration of this issue also, so that actual facts are brought on record.
17. The Ld. Commissioner should examine as to whether the multifolded yarn received by the co-noticee i.e. Superfils Products were duty paid. If this be the position, and that the same was going into the manufacture of first intermediary product namely 'fabrics', then the notification is clearly attracted and the proceedings are required to be dropped. This question also is required to be adjudicated de novo.
18. The other plea raised by the appellant is that even if the department does not consider occurrence of intermediary product as 'fabric', which, according to us, is not sustainable as, prima facie, a clear product has arisen and it is captively consumed. The sample of fabrics manufacture out of multifilament yarn was shown to us. It has all the characteristics of a fabric. How it cannot be considered as goods, has not been gone into and discussed by the Ld. Adjudicating authority. Merely because department wishes to confirm duty, they cannot suddenly take a stand in this very case that the intermediate product is not a fabric. Such a finding has also not been recorded. this was the argument raised by Ld. DR which according to us, is superfluous and would not arise. The fabric which comes into existence has undergone further process of 'needling' to bring into existence of goods 'felts'. It is the case of DR that both fabric and felt and different products. Even going by this argument the Revenue's case appears falls to the ground because "fabric" has already come into existence. Multifilament yarn, had been cleared which, according to appellant is duty paid, and cleared for manufacture of this intermediary product namely 'fabric', before it undergoes the process of manufacture of 'felt'. Therefore, even going by the definition of 'Fabric' and 'Felt' appearing in S.B. Sarcar book of "Words & Phrases" and the judgements referred to by Ld. DR, both the items are recognized as different items. Be that as it may, it is settled by the judgement of PORRITTS & SPENCER (ASIA) LTD. Vs STATE OF HARYANA (supra) referred to by Ld. Advocate that 'fabric and felts' fall within the same category of 'textiles'. Even in the case of DELHI CLOTH & GENERAL MILLS CO. LTD. Vs STATE OF RAJASTHAN & OTHERS (supra) - 1980 ELT 383 (SC) in para-9, the Apex Court had raised a question as to "what is fabric?" and answered that within the definition as per various dictionaries, it covers the product in question. It is necessary that we extract the para-9 to 14 for the purpose of benefit of Ld. Commissioner to appreciate the issue in this light.
9. What is fabric? The "Mercury" Dictionary of Textile Terms defines "fabric" as a term which covers "all textiles no matter how constructed, how manufactured, or the nature of the material from which made", and the expression "textile" is described as "any product manufactured form Fibres through twisting, interlacing, bonding, looping, or any other means, in such a manner that the flexibility, strength, and other characteristic properties of the individual fibres are not suppressed". The Man-Made Textile Encyclopedia (1959) defines fabric as "a collective term applied to cloth no matter how constructed or manufactured and regardless of the kind of fibre from which made. In structure it is planer produced by interlacing yarns, fibres or filaments. Textile fabrics include the following varieties, boding felted, knitted, braided and woven". The Fairchild's Dictionary of Textiles (1959) says that fabric is "a cloth that is woven or knit, braided, netted, with any textile fibre.....," and "textile" is said to refer to "a broad classification of any material that can be worked into fabric, such as fibres and yarns including woven and knitted fabric, felt netted fabric, lace and crouched goods". In "Textile Terms and Definitions" (1960) the word cloth is defined as "a generic term embracing all textile fabrics and laminar felts" and "textile" is applied in its modern sense "to any manufacture from fibres, filaments, or yarns, natural or artificial, obtained by interlacing". The 1967 Annual Book of ASTM Standards defines cloth as "any textile fabric but specially one designed for approval domestic or industrial use," and textile fabric as "a planer structure consisting of interlaced yarns or fibres". The 1973 Annual Book of ASTM Standards reproduced those definitions.
10. We may now examine whether a tyre cord fabric has been understood as a fabric. A publication IS : 4910 (Para VI)-1970, put out by the Indian Standards Institution, defines a "tyre cord fabric" as "a fabric consisting of tyre cord warp with widely spaced weft threads". Another publication IS : 1324-1966 of the same Institution gives the definition of tyre cord fabrics as "fabrics which comprise the main carcass of pneumatic tyres constructed pre-dominantly of warp cords (cabled yarns) with light wefts. The latter merely serve to hold the cords together for processing". The "Mercury" Dictionary of Textile Terms define cord tyre fabric as a "cloth made with strong corded sheets for the warp with as little weft as possible.....the warp takes all the strain.....". The Fairchild's Dictionary of Textiles declares that a tyre cord fabric is not a true fabric today but originally a square woven fabric was employed in making the pneumatic automobile tyre. "The modern tyre fabric is not woven or knitted, but consists of cabled yarns with twists formerly mostly cotton, now usually of high tenacity viscose rayon or nylon. These cords are arranged in parallel order and rubberized." The tyre cord fabric manufactured by the appellant admittedly consist of warp and weft and therefore this definition, which does not refer to an interlaced structure, would not apply. On the contrary, the further definition in the same publication appears to be more pertinent. It says : "When these tyre cords were first made they were assembled as a warp on a loom and held in place until rubberised by an occasional fine single filling yarn, and it is probably due to this that the term "fabric" has remained in use". Some doubt is created by the definitions included in Linton's Modern Textile Dictionary and River's Dictionary of Textile Terms. But tyre cord fabric is clearly described as a fabric by the 1973 Annual Book of ASTM Standards the Textile Terms and Definitions (1960). and in India by the India Standard Glossary of Textile Terms Relating to Man-Made Fibre & Fabric Industry. The Man-Made Textile Encyclopedia in its chapter on Industrial Fabrics gives a structural description of tyre fabrics and refers to the series of layers of cord fabric buried in rubber in the tyre body or carcass. The Wellingtion Sears Hand Book of Industrial Textile describes in some detail the process of manufacturing tyre cord fabrics. It states that "the tyre cords are woven into a 'fabric' with a very fine cotton or rayon filling yarn, just strong enough to hold the cords together during subsequent handling".
11. Now let us seen how the Government of India itself, in its various departments, looks at tyre cord fabrics. The revised India Trade Classification (1965) published by Cental Government in the Department of Commercial Intelligence and Statistics list Viscose tyre fabric (Code 653-6125) under the classification Group 653-"Textile Fabrics, Woven (not including narrow or special fabrics), other than cotton and jute fabrics'. The Ministry of Foreign Trade Resolution dated 27th February, 1971 refers separately to rayon tyre yarn, cord and fabric, and speaks of tyre cord unit producing both twisted cords and woven fabric. And the India Customs Tariff Guide (11th Edition) shows as item 53 in the Tariff Schedule : "Rayon tyre fabrics, a loosely woven material with extremely thin cotton threads running breadthwise and introduced merely for keeping the artificial silk threads running lengthwise in position." The item is inserted in the same terms in the Tariff Schedule to the India Customs Tariff Guide (13th Edition) The Table appended to the Customs and Central Excise Duties Drawback Rules lists "Viscose tyre cord fabric" (2621) under Serial NO. 26 "Textile Fabrics and Hosiery".
12. On a comprehensive consideration of the material before us, there is no escape from the conclusion that by and large a tyre cord fabric is regarded as a textile fabric. The peculiar feature that the tyre cord constitute the dominating element indicating the use to which the fabric is put and the close concentration in which it is packed in contrast to light density with which the weft thread is woven does not detract from the conclusion that what we have is a textile fabric. We are concerned with the product manufactured and sold by the appellant. It is wholly immaterial that once tyre cord fabric has, in the hands of the tyre manufacturer, undergone the process of rubberising and is embedded in the tyre body the significance of the weft thread is greatly reduced. It may also be that in the more modern process of manufacturing tyres what is used is cabled rayon with hawser twists with the cords assembled in parallel. The material on the record, however, indicates that the product manufactured by the appellant does not fall in that category. It is a woven fabric in which the intermediate process of weaving the weft thread across the wrap cord is an integral stage of manufacture, When the purchaser buys the product, it is the entire integrated woven fabric which he buys,m it is not merely the tyre cord by itself, If tyre cord was all that he desired, be would purchase that commodity, which is readily available, and not tyre cord fabric. We may also point out that item 22 of the First Schedule to the Central Excises and Salt Act speaks of "all varieties of fabrics", language wide enough to include the rayon tyre cord fabric manufactured by the appellant.
13. It was contended by Shri L.N. Sinha, for the respondents, that industrial fabrics are not envisaged within the expression "rayon fabric" in Item 22 of the First Schedule to the Central Excises and Salt Act. As we have already pointed out, the item refers to "all varieties of fabrics" and it will be noticed that Item 22(3) speaks of fabrics impregnated or coated with preparations of cellulose derivatives or of other artificial plastic materials which, we are told, would include rubberised cloth, tarpaulin cloth, P.V.C. cloth, water proof cloth and tent cloth. A whole range of fabric is included.
14. It is then urged by Shri Sinha that when the Additional Duties of Excise (Goods of Special Importance) Act, 1957 was enacted Parliament could not have intended the expression "rayon fabric" to include rayon tyre cord fabric. It is pointed out that the Statement of Objects and Reasons pertinent to the Act refers to mill-made textiles, and the submission is that the item in the First Schedule to that Act refers to fabric which affects the common man, which finds place in a popular market and is intended for popular use, and does not refer to a commodity which caters to the needs of a special category of consumers and is devoted to a particular use only. Now, the tyre manufacturing industry is of growing importance and had an increasingly important role to play in everyday life. That is evident from the overwhelming expansion of automobile traffic prompted by the complex need of a constantly celarging economy. The daily life of an average citizen is profoundly affected by the auto mobile, be it passenger bus or a goods truck or the ubiquitous scooter. Tyres are need for all. In rural areas tyres are now coming into use for bullock carts. It is futile to suggest that the tyre plays a less substantial role than other popular commodities in modern life. And, therefore, it is but a short step to recognising the status of what goes into the manufacture of a tyre - the rayon fabric as "good of special importance". It may be that the unlike cotton, silk, woollen and rayon fabrics used as wearing apparel or furnishing material the rayon tyre cord fabric is not directly employed for 'the' satisfication of a domestic need. Nonetheless, as an integral and vital constituent of an automobile tyre it is intimacy involved in the diurnal activity of human life.
19. The judgement of PORRITTS & SPENCER (ASIA) LTD also has taken into consideration this very judgement to hold that 'Dryer felts' fall within the category of 'textiles' and to be treated as 'fabrics'. Similar view was expressed in the case of MYSORE PAPER MILLS LTD. Vs CC Madras (supara) which discussed the issue of classification of 'Press felts' and the Tribunal held it as "woven fabrics." The judgement of a PORRITTS & SPENCER (Asia) Ltd and that of BHARAT SALES CORPORATION reported in 1987 (13) ECR 334 have been referred to by the Tribunal in the above judgement. We draw attention to these three judgements to the Ld. Commissioner and would direct him to reexamine the issue on merits in the light of these judgements and Board's circular NO.198/32/96-CX dated 19-4-96 which explained the expression "manufacture of fabrics" appearing in Sl.No.1 of Notfn. 35/95 dated 16-3-95 which is with regard to "Embroidery Yarn", Ld. Counsel submitted that the clarification given to that 'embroidery yarn' also applies to the present case. The Ld. Commissioner shall also look into this aspect also for the purpose of appreciating the appellants arguments.
20. We notice that even in terms of Tariff notes referred to and the explanatory notes, there is clear clarification about "fabric and felt" which has not been appreciated in the matter. We direct that the Ld. Commissioner should examine this point also de novo.
21. In respect of contention of the appellants that demands are time barred as the department was fully aware of manufacture and clearance of the yarns by both the appellants and also as there was correspondence from 1991 onwards, we notice that this argument has been rejected by Commissioner on his finding that the appellants have cleared the items with "ulterior movie" to evade duty. W e notice that the ambit of law laid down by the Apex Court judgements as cited by Counsel is that "Suppression" is surreptitious removals with clear intention to evade duty and such clearances are not within the knowledge of the department. It is a situation wherein surreptitious removal takes place deliberately and the department is in totally dark about such clearances and the entire case comes to light only on investigation. This is not so in the present case as M/s. Superfils Products had cleared the goods under documents and challans to Porritts &Spencer (Asia) Ltd. and Dinesh Mills Ltd. They have received the same from appellants, It is on record that appellants received this single yarn on job work basis from Superfils Products and there was documentation, correspondence etc. If that be so, then demands on the ground of limitation have to fall. As all the material facts and documents are not before us, therefore for the reasons enumerated, the impugned order requires to be re-adjudicated.
22.In that view of the matter, the entire order is set aside and matter remanded to the original authority for de novo consideration in the light of observations above after giving an opportunity of hearing and observing the principles of natural justice to the appellants, Ordered accordingly.
(pronounced in open court on 27-4-01)