1992 (10) TMI 159 - AT - Central Excise

Cotton fabrics - Process of calendering undertaken on zero zero machine without attached baby stenter

Issues Involved:
1. Whether the process of shrinking cotton fabrics using the 'zero zero' machine without a 'baby stenter' attachment qualifies for exemption under Notification No. 80/76 or Notification No. 253/82 as amended by Notification No. 213/88.
2. Whether the process of calendering with the zero zero machine constitutes a manufacturing process subject to excise duty.
3. Whether the exemption Notification No. 253/82, as amended by Notification No. 213/88, has retrospective effect.
4. Whether the demand raised by the Department is barred by time due to the larger period of limitation.

Detailed Analysis:

1. Exemption Eligibility Under Notification No. 80/76 and 253/82:
The appeals primarily questioned if the process of shrinking cotton fabrics using the zero zero machine without the baby stenter attachment qualifies for exemption under the specified notifications. The parties argued that the zero zero machine, without the baby stenter, could not achieve the shrinkage to the extent necessary to be considered shrink-proof. They contended that the machine was used merely for calendering, which is exempt under Notification No. 253/82, as amended by Notification No. 213/88. The Tribunal noted that the zero zero machine without the stenter attachment does not impart a permanent shrink-proof effect, and thus, the process should be considered calendering, eligible for exemption.

2. Process of Calendering and Manufacturing:
The parties argued that the process done on the zero zero machine was essentially calendering, not a manufacturing process, as it does not impart a lasting change to the fabric. The Tribunal referred to the Supreme Court's decision in Siddeshwari Cotton Mills, which held that calendering does not amount to manufacturing. The Tribunal concluded that as the process did not involve grooved rollers, it remained within the scope of calendering, which is exempt from duty.

3. Retrospective Effect of Notification No. 213/88:
The Tribunal discussed whether the amendment to Notification No. 253/82 by Notification No. 213/88, which introduced an explanation clause, had retrospective effect. The explanation clarified that calendering includes processing with the zero zero machine without a stenter attachment. The Tribunal held that the amendment was clarificatory in nature and thus had retrospective effect, supporting the view that the exemption applied to the processes undertaken by the appellants.

4. Time Bar and Larger Period of Limitation:
The Department invoked the larger period of limitation, alleging that the parties had not provided true information. The Tribunal found that the Department was aware of the manufacturing processes since 1985, and no new facts were suppressed by the appellants. Therefore, the demand was barred by time, as the extended period of limitation could not be invoked.

Conclusion:
The Tribunal concluded that the process of calendering using the zero zero machine without a stenter attachment qualifies for exemption under Notification No. 253/82, as amended by Notification No. 213/88. The process did not constitute manufacturing, and the exemption notification had retrospective effect. The demand raised by the Department was barred by time due to the lack of suppression of facts by the appellants. All appeals were disposed of in favor of the appellants.

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