1987 (12) TMI 114 - AT - Central Excise

Summary

Issues: Interpretation of finishing processes for cotton fabrics under Central Excise Notification No. 80/76 and applicability of interest rates under Central Excise Rule 49A.

In this case, the appellants, engaged in manufacturing cotton fabrics, availed the deferment of excise duty under Central Excise Rule 49A. The dispute arose regarding the appropriate interest rate to be applied when clearing grey fabrics after calendering and shearing processes. The lower authorities held that interest at 3% of the yarn duty was applicable, contrary to the appellants' claim of 1-1/2%. The main contention was whether calendering and shearing should be considered as finishing processes or merely incidental activities. The appellants argued that these processes do not transform grey fabrics into processed fabrics. They relied on precedents to support their position.

The Tribunal referred to a previous decision where calendering was deemed a finishing process falling within the scope of the Central Excises and Salt Act. The Tribunal noted that fabrics cleared after calendering, although known as grey fabrics in trade, were not classified based on color but on whether any process was applied. Textile industry definitions were cited to distinguish between grey goods and finished fabrics. The Tribunal also mentioned a recent similar case where the principle applied to cropping (shearing) was extended to calendering. It was clarified that under Notification No. 80/76, fabrics subjected to specified finishing processes in the same factory where they were produced are not exempt. Consequently, the demand for 3% interest under Central Excise Rule 49A for fabrics cleared after processing was deemed valid.

Ultimately, the Tribunal found the appellants' argument untenable in light of previous decisions and upheld the lower authorities' orders, dismissing the appeals. The judgment clarified the interpretation of finishing processes for cotton fabrics under the relevant notification and the correct application of interest rates under Central Excise Rule 49A in such cases.