2004 (9) TMI 146 - AT - Central Excise

Summary

Issues:
1. Interpretation of the process of embossing and pleating on fabrics under Central Excise Act.
2. Application of Section 37B order on past closed assessments.
3. Assessment of duty demand and penalty for the period in dispute.

Issue 1: Interpretation of the process of embossing and pleating on fabrics under Central Excise Act:
The Tribunal analyzed the process of embossing and pleating on fabrics in the context of Tariff item 22(1)(b) of the erstwhile Central Excise Tariff and Note 4 of Chapter 54 of the Central Excise Tariff Act, 1985. It referred to the Supreme Court judgment in Siddeshwari Cotton Mills case, emphasizing that a process should impart a change of lasting character to the fabric to qualify as "manufacture" under Section 2(f)(v) of the Central Excise Act. The Tribunal considered embossing and pleating as processes that add substantially to the visual appeal, feel, and marketability of fabrics, making them commercially distinct from the base fabrics. It noted that embossed or pleated effects do not disappear within a reasonable period, even after normal use, and held that embossing and pleating amount to manufacture under Section 2(f).

Issue 2: Application of Section 37B order on past closed assessments:
The Tribunal examined the Section 37B order issued by the Central Board of Excise & Customs, clarifying that embossing and pleating on fabrics amount to manufacture. It determined that the order would not apply retrospectively and would not affect past closed assessments. The Tribunal rejected the department's argument that the order should apply to the period in dispute, stating that the assessment for that period had already been decided in favor of the appellants by the Tribunal. Citing a Supreme Court ruling in a similar case, the Tribunal emphasized that demands based on circulars have effect only from the date of publication. Therefore, it concluded that the Section 37B order did not impact the duty demand for the period in question.

Issue 3: Assessment of duty demand and penalty for the period in dispute:
The Tribunal found that the processes of embossing and pleating were temporary in nature and aligned with the processes covered by the relevant tariff items. It held that the duty demand and penalty imposed on the appellants were not sustainable. Additionally, the Tribunal clarified that even if the processes were considered as manufacture, the demand could not be upheld based on the past assessments and the application of the Section 37B order. Consequently, the Tribunal set aside the impugned order and allowed the appeal, ruling in favor of the appellants.

In conclusion, the Tribunal's detailed analysis reaffirmed that embossing and pleating on fabrics constitute manufacturing processes under the Central Excise Act, while also addressing the application of the Section 37B order on past assessments and the assessment of duty demand and penalty for the disputed period.