1983 (2) TMI 292 - AT - Central Excise

Issues Involved:
1. Classification of the fabric under the Central Excise Tariff.
2. Stage at which duty is attracted.
3. Authority of the Assistant Collector to revise the assessment after approval.

Issue-Wise Detailed Analysis:

1. Classification of the Fabric:

The appellants, manufacturers of cotton fabrics, filed a classification list under Rule 173-B of the Central Excise Rules, 1944, for Sort No. 3289, describing the fabric as "Dyed, mercerised, printed (Brasso) polyester, cellulosic, cotton shirting, wash and wear, pre-shrunk finish." They declared the terene content as 28% at the grey stage and 31.8% at the processed stage, seeking classification under Item No. 19-I(2) of the Central Excise Tariff Schedule (CET), which was initially allowed by the Assistant Collector. However, upon chemical testing, the processed fabric's terene content was found to be 32.1%, leading to a reclassification under Item No. 19-I(1A) CET.

The Tribunal held that though the grey fabric fell under Item 19-I(2), the processed fabric, due to the increase in non-cellulosic fibre content to over 30%, correctly fell under Item 19-I(1A). The Tribunal rejected the appellants' contention that the grey stage composition should determine duty liability, citing the Central Excises and Salt and Additional Duties of Excise (Amendment) Act, 1980, which clarified that processing amounts to manufacture and created separate sub-items for unprocessed and processed fabrics.

2. Stage at which Duty is Attracted:

The appellants argued that the fabric should be classified and duty determined at the grey stage, as processing did not amount to "manufacture" under Section 2(f) of the Central Excises & Salt Act. They cited the Gujarat High Court's judgment in Vijay Textiles v. Union of India, which stated that processing does not create a new woven substance.

The Tribunal, however, noted that the 1980 Amendment Act explicitly included processing within the definition of "manufacture," making processed fabrics distinct entries in the excise tariff. Therefore, the processed fabric, with its altered composition, was correctly classified under Item 19-I(1A), and duty was attracted at the stage of clearance from the factory.

3. Authority of the Assistant Collector to Revise Assessment:

The appellants contended that the Assistant Collector could not review his own orders and that only the Central Board of Excise & Customs could review the decision under Section 35-A of the Central Excises & Salt Act.

The Tribunal found that the classification list submitted by the appellants bore an endorsement indicating that samples were drawn for testing, and the approval was "until further orders," implying it was not final. The Assistant Collector was within his jurisdiction to issue Show Cause Notices-cum-Demand and revise the assessment based on the test results. The notices were issued within the 12-month time limit as per Rule 10 read with Rule 173-J, making the appellants' arguments regarding Rule 10 and Rule 10A irrelevant.

The Tribunal confirmed the Appellate Collector's order and rejected the appeal, upholding the reclassification and the Assistant Collector's authority to revise the assessment.

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