1992 (7) TMI 176 - AT - Central Excise

Summary

Issues Involved:
1. Legality of the process of dyeing and whether it constitutes manufacture.
2. Justification for the reduction of personal penalty and redemption fine by the Collector (Appeals).
3. Allegation of the Collector (Appeals) exceeding the scope of the Show Cause Notice.

Detailed Analysis:

1. Legality of the Process of Dyeing and Whether It Constitutes Manufacture:
The central issue was whether the respondents' process of dyeing man-made fabrics, specifically Bembarg (Georgette), constituted "manufacture" under the Central Excises and Salt Act, 1944. The respondents argued that they were engaged in manual dyeing using open pans or degs, exempt from duty. However, it was found that they used a power-operated machine called Malida Machine for washing fabrics before dyeing, which was a necessary step to remove stains and dust. The Collector (Appeals) rejected the argument that the washing and dyeing stages should be viewed separately, stating, "The entire activity has to be seen as a whole." The Tribunal upheld this view, agreeing that the process of dyeing, which included washing, fell under Tariff Item No. 22(1)(b)-CET, which covers "man-made fabrics subjected to the process of bleaching, dyeing, printing, shrink-proofing, tentering, heat-setting, crease resistant processing or another process or any two or more of these processes."

2. Justification for the Reduction of Personal Penalty and Redemption Fine by the Collector (Appeals):
The Department appealed against the reduction of the personal penalty from Rs. 25,000/- to Rs. 1,000/- and the redemption fine from Rs. 5,000/- to Rs. 500/-. The Department argued that considering the total value of the goods and the duty involved, the original penalties were justified. However, the Tribunal found that the Collector (Appeals) exercised discretion appropriately, noting that the respondents were engaged in the activity for only about two months, and the situation was not entirely clear due to the presence of other similar units. The Tribunal concluded that the reduction of penalties did not warrant interference.

3. Allegation of the Collector (Appeals) Exceeding the Scope of the Show Cause Notice:
The respondents contended that the Collector (Appeals) went beyond the Show Cause Notice by considering the washing process as part of the dyeing process, thus making it dutiable. The Tribunal examined the Show Cause Notice and found that it included references to the entire manufacturing process, including the use of power-operated machines for washing. The Tribunal rejected the argument, stating that the authorities did not confirm the demand on grounds not alleged in the Show Cause Notice.

Conclusion:
The Tribunal upheld the Collector (Appeals)'s decision that the process of dyeing, including washing, constituted manufacture and was subject to duty. It also supported the reduction of penalties, considering the specific circumstances of the case. The appeal by the Department and the cross-objections by the respondents were both rejected.