2008 (2) TMI 235 - AT - Central Excise

Processing of man-made and cotton fabrics - since cotton fabrics in semi-finished condition was shown in the RG-I Register as loose stock they have to be considered as finished goods and was required to be cleared on payment of duty - that every individual process on grey fabrics amounts to manufacture and therefore no fabric can be considered as semi finished - merely because the fabric was in loose condition it does not mean that the fabric does not become excisable

Summary

Issues:
Interpretation of compounded levy scheme and duty liability for fabrics processed before and after the scheme's introduction.

Analysis:
The case involved an appeal by the revenue against a decision regarding the duty liability of a textile company under the compounded levy scheme. The scheme mandated duty payment based on annual production capacity determined by the Commissioner. Fabrics processed before the scheme's introduction were to pay duty at ad valorem rates prevailing then, while those processed after were subject to the compounded levy scheme. The company declared a stock of fabrics as semi-finished on the night before the scheme's implementation, subsequently clearing it without duty payment. A show cause notice was issued, alleging duty evasion on these fabrics. The Dy. Commissioner upheld the duty liability and imposed a penalty, but the Commissioner (Appeals) overturned this decision, considering the fabrics as covered by the compounded levy scheme.

Revenue's Argument:
The revenue contended that all textile processes constitute manufacturing, making no fabric semi-finished. The absence of evidence showing the fabrics were yet to undergo stentering was highlighted. Even if stentering was pending, duty was payable for prior processes like scouring, bleaching, etc. Reference was made to a notification specifying that finished goods in the RG-I Register included those in the finishing room. The Tribunal's decision in a similar case supported this argument.

Respondent's Defense:
The respondent argued that loose fabrics in their register were not fully processed or marketable. They explained their accounting practices but failed to reconcile discrepancies in their statements. While admitting contradictions in their submissions, they maintained that the loose stock was not fully manufactured and thus not liable for duty. They cited a Tribunal decision stating that goods in the finishing room were not necessarily marketable.

Judgment:
The Tribunal found that the loose fabrics in the register were considered fully finished goods. The respondent's failure to provide evidence of incomplete processing led to the conclusion that all processes rendered the fabrics excisable. The Tribunal emphasized that every textile process amounted to manufacturing, rejecting the argument of fabrics being semi-finished. The decision in a previous case supported this view, emphasizing duty payment for intermediate goods in manufacturing. Consequently, the revenue's appeal was allowed, overturning the Commissioner (Appeals) decision.

This detailed analysis highlights the key arguments, interpretations, and the Tribunal's reasoning in the judgment regarding duty liability under the compounded levy scheme for fabrics processed before and after its implementation.