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1. The petitioners have been manufacturing gauzes and bandages. The process of manufacture has been described in paragraph 1. 1 in the petition. The petitioners have averred that they purchase grey powerloom cotton fabrics which are suitable for being processed into surgical absorbent gauzes and surgical roll bandages. These, grey power-loom cotton fabrics are treated by them in their factory and the end-product which comes into existence is the absorbent gauzes or roll bandages. The treatment which they impart in their factory to grey powerloom cotton fabrics consists of the following factors:

(1) Absorbency.
(2) Removal of foreign matters.
(3) Minimising the souring loss.
(4) Natural whitening free from optical whiteners.
(5) Control of ash contents.
(6) Maintenance of the measurements of surgical absorbent gauze and surgical roll bandages.
(7) Folding, rolling and cutting of gauzes and bandages.
(8) Packing of gauzes and bandages.

That the petitioners have been purchasing grey powerloom cotton fabrics from the market and that they have been imparting to them the treatment as shown in paragraph 1. 1 in the petition is not in dispute. In paragraph 3 of the affidavit-in-reply filed on behalf of the respondents by Mr. Gautam Ray, Assistant Collector of Central Excise, it is admitted that the petitioners have been purchasing grey powerloom cotton fabric from the market. It is also admitted that the petitioners have been subjecting these cotton fabrics to the process of bleaching, stentering and other processes which are mentioned by the petitioners in paragraph 1. 1 of the petition. The next averment which has been made in paragraph 3 of the affidavit-in-reply is that the surgical dressings and bandages manufactured by the petitioners are not medicated. However, they are required to be sterilized before use. The final product which emerges is known as drug and exempted under Notification No. 55/75 dated 1st March 1975 as amended by Notification No. 62/78 dated 1st March 1978. The next averment which has been made is that this exemption is avai-labkfonly with effect from 1st March 1978. For the period prior to 1st March 1978, the petitioners are liable to pay excise duty upon these gauzes and bandages, both under Tariff Item 19 and Tariff Item 68 in Schedule to the Central Excises and Salt Act, 1944.

4. The question, therefore, which has arisen before us is whether the petitioners who are manufacturing gauzes and bandages from grey powerloom fabrics are liable to pay excise duty under Tariff Item 19 because the grey cotton fabric is subjected to bleaching which is an intermediate process and again under Item 68. When bandages and gauzes are finally produced.

5. Mr. J.C. Bhatt who appears on behalf of the petitioners has argued that when there is a single, continuous and integrated process of manufacturing gauzes and bandages, the intermediate process of bleaching the grey cotton fabric cannot be taxed under Tariff Item 19, According to him, it is not a product at all. It is only a part of the manufacturing process under which gauzes and bandages are manufactured. He has further argued that bleached grey cotton fabric is neither removed nor marketed by the petitioners. He tried to tell us that the bleached grey cotton fabric was used by the petitioners or, consumed by them for the purpose of manufacturing gauzes and bandages. In other words, according to him, the bleached grey cotton fabric was used for home consumption. The argument which Mr. Bhatt has raised can be appreciated better if we bear in mind that subjecting grey cotton fabrics to bleaching process is merely one of the processes applied to those fabrics for the purpose of bringing out the final product in the shape of gauzes and bandages. It is difficult to say that bleached the grey cotton fabrics are, in the present context, a product at all. If it is not a product at all, the question of home consumption does not arise.

9. We have already observed above that, in the instant case, the petitioners' factory is not a composite factory. They do not hold two licences to manufacture two different commodities, Thirdly, there is one single, continuous and integrated process of manufacturing gauzes and bandages out of grey cotton fabrics. Therefore, petitioners manufacture only one end-product--gauzes and bandages. They do not manufacture bleached grey cotton fabric which represents only a part of the manufacturing process applied to the production of gauzes and bandages. Since it is one continuous and integrated process of manufacture there is neither production or manufacture of bleached grey cotton fabric nor is there any removal of it within the meaning of the law on central excises. Since bleached grey cotton fabric represents an intermediate stage in the process of manufacturing gauzes and bandages or since it is only a part of manufacturing process arid is not a product at all, it cannot be subjected to tax under the Central Excises and Salt Act, 1944.