Customs, Excise and Gold Tribunal - Delhi
Madura Coats Ltd. vs Collector Of Central Excise on 12 October, 1987
Equivalent citations: 1987(14)ECC337, 1987(13)ECR1130(TRI.-DELHI), 1987(32)ELT450(TRI-DEL)
ORDER
G. Sankaran, Sr. Vice-President
1. As both the appeals involve a common issue, they are being dealt with together and disposed of under this common order.
2. The issue arising for determination is whether or not cropping of fabrics is a process ancillary or incidental to the completion or manufacture of grey cotton fabrics under Item No. 19I(a)/19I(b) of the Central Excise Tariff Schedule (CET, for short). The department's case is that the appellants are manufacturing grey cotton fabrics which are then subjected to the finishing process known as cropping which makes the product classifiable under Item No. 191(b). Alleging, on the above basis, that the appellants had failed to declare the said fact of manufacture and thereby contravened the provisions of Central Excise Rules 49A, 173B and 173G, the Assistant Collector passed two orders, after holding adjudication proceedings, demanding differential interest at the rate of 1.5% besides differential duty.
3. The appellants' contention, however, is that cropping is not a process incidental or ancillary to the completion of the manufactured product which they say is unprocessed fabrics. In other words, they say that the process of cropping of grey fabric does not result in the transformation of the fabric. The resultant product would not be classifiable under Item No. 19 I(b). A plea was also taken before the Appellate Collector that the demand notice, having been issued only 5-11-1981, could not be enforced for the period prior to 4-5-1981 as it was barred by limitation. In appeal, the Collector of Central Excise (Appeals), Madras, by his impugned order dated 4-2-1983, held that the process of cropping resulted in the classification of the fabric changing from Item 191(a) to 191(b). He thus upheld the Assistant Collector's orders except insofar as the enforcement of the demands for the period prior to 4-5-1981 which he held was barred by limitation. It is this order which is now in challenge in the present appeals.
4. The appellants were not represented when the matter was taken up for hearing. However, they had written to say that the appeals might be disposed of-, on the basis of the submissions in the memos of appeal. Accordingly, we have perused the record and heard Shri Balbir Singh, Sr. D.R. for the respondent.
5. Notification No. 80/76, dated 16-3-1976 exempted cotton fabrics falling under the then Item No. 191(2), CET, when subjected to the finishing processes specified in the notification from the whole of the duty of excise leviable thereon subject to the conditions set out in the corresponding entries in the notification. The process of cropping or butta cutting was one of the specified finishing processes and there was no condition stipulated against the same. By Notification No. 292/79, dated 24-11-1979, the following proviso was added to the Notification No. 80/76 :
"Provided that no such exemption shall apply -
(i) if unprocessed cotton fabrics falling under sub-item I(a) of the said Item No. 19 on which the duty of excise is leviable either in whole or in part, are subjected to any process or processes specified in the said Table, within the factory in which the said unprocessed fabrics have been produced; or
(ii) if cotton fabrics falling under sub-item I 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 processes, other than the processes specified in the Table."
It is with reference to this amendment that the Collector (Appeals) has held that the process of cropping of fabrics resulted in changing the classification of the fabric from 191(a) to 19 l(b) though the reasons for this conclusion have not been clearly spelt out in the order.
6. The Senior D.R. only reiterated the points mentioned in the impugned order in support of the department's stand.
7. The process of cropping has been defined in the book titled "Fairchild's Dictionary of Textiles" in the following terms :-
"Cropping - A finishing process of shearing surface fuzz or nap of fabrics, See shearing 2".
"Shearing 2 - A finishing operation in which uneven threads are mechanically cut or trimmed from the face of the fabric. Almost always employed for woollen or worsted and extensively employed on other fabrics. The amount of shearing on napped and pile fabrics varies according to the desired height of the nap or pile; on clear/ finish fabrics like gabardine, a very close shearing is given."
8. The following passage occurs in the book "Textile Terms and Definition" published by the Textile Institute, Manchester :-
"Crop - See Shear (2) & (3)"
"Shear (2) - to cut a nap or pile to uniform length or height (also called crop) (3) - to cut loose fibres or yarn from the surface of a cloth after weaving (also called crop)".
The question is whether the unprocessed fabric in the present case is to be considered as a processed fabric after it is subjected to the finishing process of cropping.
9. For the purpose of the present appeal, it appears to us to be unnecessary to discuss the above issue at length and record a finding thereon. This is because sub-clause (i) of the proviso inserted in Notification No. 80/76 by amending Notification No. 292/79 specifically provides that if unprocessed cotton fabrics (there is no dispute that the goods with which the appellants commenced their activity was unprocessed fabrics) on which excise duty was leviable either in whole or in part, are subjected to any process or processes specified in the table to the notification within the factory in which the subject unprocessed fabrics had been produced, the exemption contained in the notification would not apply. As already noted, cropping is a process specifically mentioned in the table to the said notification. Since the appellants had produced the unprocessed fabric in their factory and subjected the same to the finishing process of cropping in the same factory, the exemption contained in the notification would not apply in the case of the appellants.
10. In the above view of the matter, the demand for differential interest in terms of the Central Excise Rule 49A which provides that where cotton fabrics are cleared after processing, 3% of the duty payable on the yarn shall be payable by way of interest on the amount of yarn duty, was justified.
11. In the result, the appeals are dismissed.