2008 (2) TMI 292 - AT - Central Excise

Exemption under Notification No. 253/82 to cotton polyester blended lungi fabrics - respondents had subjected the impugned fabrics to chemical padding and special finishing - revenue contend that exemption is not available to goods which were subjected to processes impugned process of padding with starch neither give permanent character to lungi, nor amount to manufacture within meaning of section 2(f) benefit of notification is allowed revenue appeal dismissed

Summary

Issues Involved:
1. Eligibility for exemption under Notification No. 253/82 for processes undertaken on cotton polyester blended lungi fabrics.
2. Determination of whether the processes amounted to manufacture.
3. Use of starch in the padding process.
4. Allegation of mercerizing the fabrics.
5. Imposition of penalties under Section 11AC and Rule 173Q.

Detailed Analysis:

1. Eligibility for Exemption:
The primary issue was whether the processes undertaken by the respondents on cotton polyester blended lungi fabrics qualified for exemption under Notification No. 253/82. The notification exempted certain processes from duty but did not cover processes like chemical padding and special finishing, which were alleged to have been undertaken by the respondents.

2. Determination of Manufacture:
The Commissioner concluded that the processes of padding with starch and chemicals, as well as special finishing, did not impart a lasting characteristic to the fabrics and thus did not constitute manufacture. This conclusion was based on Board's Circular and technical clarifications which stated that processes like padding with starch did not amount to manufacture as they did not impart a permanent effect to the fabrics.

3. Use of Starch in Padding Process:
The Commissioner verified that starch was indeed used in the padding process by SSM, based on records and trade inquiries. The presence of starch was confirmed by a test conducted by South India Textile Research Association (SITRA), despite the department not divulging its own test results. Therefore, the allegation that starch was not used was found to be baseless.

4. Allegation of Mercerizing:
The Commissioner found that mercerizing dyed fabrics was technically infeasible and that the respondents did not undertake this process. This conclusion was supported by technical literature and the SITRA test report. The overwriting in the mercerizer notebook was deemed to be a mistake without any motive.

5. Imposition of Penalties:
The Commissioner dropped the proposal to penalize the respondents under Section 11AC and Rule 173Q, finding no justification for such penalties. The Revenue's appeal for modifying the impugned order, which included demands for duty and penalties, was dismissed.

Conclusion:
The Tribunal upheld the Commissioner's findings that the processes undertaken by the respondents did not amount to manufacture and were eligible for exemption under Notification No. 253/82. The appeals filed by the Revenue were dismissed, and the orders of the Commissioner were sustained. The operative part of the order was pronounced in open court on 22-1-2008.