1994 (4) TMI 186 - AT - Central Excise

Summary

Issues Involved:
1. Whether the process of calendering amounts to manufacture.
2. Whether the respondents are entitled to exemption under Notification No. 79/82-CE.
3. Whether the demand for duty is time-barred.

Issue-wise Detailed Analysis:

1. Whether the process of calendering amounts to manufacture:

The core issue discussed was whether calendering constitutes a manufacturing process. The respondents argued that calendering is not a manufacturing process and cited the Supreme Court's decision in Mafatlal Fine Spinning & Mfg. Co. Ltd. v. Collector of C. Excise, which held that calendering is a finishing process and does not result in a new commercial commodity. The Collector (Appeals) had also held that calendering is not a manufacturing process. However, the Department contended, referencing the Supreme Court's decision in Collector of Central Excise v. Rajasthan State Chemical Works, that any essential activity related to the final product should be considered part of the manufacturing process. The Tribunal concluded that while calendering might not itself be a manufacturing process, it is an integral part of the overall manufacturing process when done with the aid of power.

2. Whether the respondents are entitled to exemption under Notification No. 79/82-CE:

The respondents processed man-made fabrics without the aid of power in their factory but sent them to outside factories for calendering with the aid of power. The Assistant Collector denied the reduced rate under Notification No. 79/82-CE because the calendering was done with the aid of power. The proviso to the notification states that the rate of duty shall be reduced by 40% for fabrics processed without the aid of power or steam. The Department argued that since the calendering was done with power, the exemption should not apply. The Tribunal referenced the case of Amar Processors, which held that using power-operated machinery disqualifies the fabric from the partial exemption. The Tribunal ultimately agreed with this interpretation, denying the exemption under Notification No. 79/82-CE.

3. Whether the demand for duty is time-barred:

The show cause notice was issued on 19th December 1983 for the period from 1st March 1982 to 31st December 1982. The Vice President noted that there was no charge of suppression or misstatement of facts, and the respondents had been regularly filing Classification Lists claiming the benefit of Notification No. 79/82, which had been approved by the Assistant Collector. Therefore, the demand was considered time-barred. This view was supported by the Technical Member, who agreed that the demand was indeed time-barred due to the absence of any allegations of willful misstatement or suppression of facts.

Conclusion:

The majority opinion, including the Vice President and the Technical Member, held that the benefit of Notification No. 79/82-CE was admissible and the demand was time-barred. Consequently, the appeal filed by the Department was dismissed. The detailed analysis highlighted that while calendering with power might be part of the manufacturing process, the specific conditions of the notification and the time-barred nature of the demand led to the dismissal of the appeal.