1997 (1) TMI 156 - AT - Central Excise

Issues Involved:
1. Processing of man-made fabrics with the aid of steam/power.
2. Entitlement for exemption under Notification No. 79/82-C.E.
3. Determination of duty and penalty.
4. Use of boiler and steam in the processing of fabrics.
5. Nature of the fabrics processed (whether man-made or natural).
6. Method of computation of duty.

Issue-Wise Detailed Analysis:

1. Processing of man-made fabrics with the aid of steam/power:
The appellants were engaged in printing fabrics on a job work basis and received grey fabrics from various dealers. A Show Cause Notice dated 21-6-1985 alleged that the appellants processed man-made fabrics with the aid of power and steam without obtaining a Central Excise Licence. The appellants denied these charges, claiming they processed "Silk" fabrics which were exempted from duty under Notification No. 24/85, dated 2-8-1985. They argued that printing was carried out manually on tables heated with steam, which should not disqualify them from exemption under Notification No. 79/82, as the process was manual.

2. Entitlement for exemption under Notification No. 79/82-C.E.:
The appellants contended that the use of tables heated by steam did not constitute processing with the aid of steam or power. They relied on the Tribunal's decision in Chamundi Vastralankaran Udyog v. Collector of Central Excise, which held that tables heated with steam did not disqualify the user from the benefit of Notification No. 79/82. The Tribunal agreed, stating that the Collector's finding was not well-founded, as the tables and boiler could not be considered "machines" for the purposes of the notification.

3. Determination of duty and penalty:
The Additional Collector confirmed a duty demand of Rs. 1,64,191.12 and imposed a penalty. The appellants argued that the determination of duty was irrational and arbitrary, as it was based on assumptions and presumptions without conclusive evidence that the fabrics were man-made. The Tribunal found that the impugned order relied on insufficient material and that the appellants were entitled to the benefit of the doubt.

4. Use of boiler and steam in the processing of fabrics:
The appellants claimed that their boiler started functioning only in June 1983, supported by documents relating to the purchase and installation of the boiler. The Department argued that the appellants had used the boiler without obtaining a license and that steam generated from the boiler was used in processing fabrics. The Tribunal found that there was no conclusive evidence to show that the boiler was used before 22-3-1983.

5. Nature of the fabrics processed (whether man-made or natural):
The appellants argued that the nature of the fabrics was not clear from the statements of suppliers, as "chiffon" could refer to both pure and artificial fabrics. The Department contended that "chiffon" was understood as artificial or man-made fabric in commercial parlance. The Tribunal found that the evidence was not free from ambiguity and that the Department's reliance on selective statements from suppliers was insufficient to conclusively determine the nature of the fabrics.

6. Method of computation of duty:
The appellants disputed the basis for the computation of duty, arguing that there was no evidence to show that the fabrics received were man-made. The Tribunal found that the Department's method of computation was based on insufficient and inconclusive material.

Conclusion:
The Tribunal set aside the impugned order, finding that the appellants were entitled to the benefit of the doubt due to factual infirmities in the Department's case. The appeal was allowed, and the demand for duty and penalty was withdrawn.

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