2004 (3) TMI 494 - AT - Central Excise

Issues Involved:
1. Validity of the Order-in-Original confirming demands.
2. Whether the appellants manufactured and cleared shrink-proof fabrics.
3. Applicability of the 1964 Board guidelines.
4. Reliance on private documents and test reports.
5. Marketability of the processed fabrics as shrink-proof.
6. Time-barred nature of the demands.
7. Export of processed goods and duty liability.

Detailed Analysis:

1. Validity of the Order-in-Original Confirming Demands:
The appellants challenged the correctness and validity of the Order-in-Original No. 52/2001, dated 29-11-2001, passed by the Commissioner of Central Excise, Coimbatore. The Commissioner confirmed the demands based on investigations that the appellants had manufactured and cleared shrink-proof fabrics under Chapter sub-heading No. 5207.29 of the Central Excise Tariff.

2. Whether the Appellants Manufactured and Cleared Shrink-Proof Fabrics:
The appellants, job workers, received 100% cotton fabrics for processes such as washing, zero-zero processing, and starch padding. They contended they did not have the facility to manufacture shrink-proof fabrics, supported by a letter from the South India Textile Research Association (SITRA) certifying the absence of a stenter machine required for shrink-proofing. The notification No. 8/96-C.E. granted exemption to cotton fabrics processed with a zero-zero machine without a stenter attachment.

3. Applicability of the 1964 Board Guidelines:
The appellants argued that the guidelines issued by the Board in 1964 were invalid after the introduction of the new Central Excise Tariff from 1-3-1986. The CBEC Circular No. 38/38/94-CX. 4, dated 27-5-94, withdrew those guidelines. The Commissioner's reliance on the 1964 guidelines was deemed unsustainable and violative of natural justice.

4. Reliance on Private Documents and Test Reports:
The Commissioner relied on private documents and lab registers showing shrinkage less than 1.5%, which the appellants contested. They argued that without a stenter machine, any shrinkage achieved through other processes was inconsequential. The Tribunal's rulings in several cases supported the appellants' stance that reliance on private registers was not as per law.

5. Marketability of the Processed Fabrics as Shrink-Proof:
The appellants argued that the fabrics were not marketed as shrink-proof, as evidenced by test reports showing shrinkage beyond the residual shrinkage parameters. The Commissioner's order lacked proof of marketability, which was essential to sustain the charges of manufacturing shrink-proof fabrics.

6. Time-Barred Nature of the Demands:
The appellants contended that the demands were time-barred and that there was no suppression of facts, as the department was aware of the processes carried out. The Commissioner's order did not adequately address these pleas.

7. Export of Processed Goods and Duty Liability:
The appellants claimed that all processed goods were ultimately exported, negating any duty liability. This aspect was not examined by the Commissioner, further undermining the order's validity.

Conclusion:
The Tribunal found that the Commissioner erred in confirming the demands based on outdated guidelines and unsubstantiated evidence. The absence of a stenter machine and the lack of proof of marketability as shrink-proof fabrics were critical factors. The Commissioner's contradictory findings and failure to consider the time-barred nature of the demands and the export of goods rendered the order unsustainable. The appeal was allowed, and the impugned order was set aside with consequential relief to the appellants.

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