1997 (3) TMI 264 - AT - Central Excise

Summary

Issues:
1. Denial of natural justice in adjudicating proceedings.
2. Processing of fabrics and duty leviable.
3. Classification of fabrics under Tariff Item No. 22(1)(b).
4. Applicability of the extended period and limitation.
5. Dispute regarding classification under Heading 59.09.
6. Claim for benefit under Notification No. 35/84-C.E.

Analysis:

1. Denial of Natural Justice:
The appellants alleged denial of natural justice due to inadequate hearing opportunities. The Collector issued a show cause notice in July 1987, and the appellants delayed their reply submission citing unavailability of document copies. Despite multiple requests, the appellants submitted an interim reply in December 1987, and further delays ensued. The Collector scheduled a hearing in August 1988, which the appellants did not attend. The Tribunal concluded that the appellants had sufficient opportunities and failed to justify their absence, thus rejecting the plea of denial of natural justice.

2. Processing of Fabrics and Duty Leviable:
The appellants processed grey fabrics, claiming they only treated soiled or dirty cloth during transportation or storage. However, statements from company officials revealed consistent processing practices like pre-shrinking, scouring, and heat setting on the entire fabric. The Tribunal noted that the processes undertaken aligned with dutiable processes specified under Tariff Item No. 22(1)(b), leading to the conclusion that duty was indeed payable on the processed fabrics.

3. Classification of Fabrics:
The Collector rejected the classification under Heading 59.09, opting for Chapter 55 classification post-March 1986. The dispute arose from the use of fabrics as industrial fabrics in textile processing. Technical opinions from BRTA and SASMIRA supported the industrial use claim, warranting a reconsideration by the Collector for proper classification determination.

4. Applicability of Extended Period and Limitation:
Although the appellants contested the applicability of the extended period and limitation in the appeal memorandum, this point was not emphasized during the hearing. The Tribunal found that the show cause notice adequately outlined the elements for invoking the extended period, dismissing the contention of limitation.

5. Benefit under Notification No. 35/84-C.E.:
The appellants sought the benefit of Notification No. 35/84-C.E., which prescribed an additional duty rate on fabrics with specific polyester content. The Collector rejected this claim citing undisclosed fabric construction and alleged manufacturer suppression. However, technical reports confirmed the polyester content, necessitating a reassessment by the Collector to determine eligibility for the notification benefit.

6. Conclusion:
While affirming that the appellants' processes amounted to manufacture, the Tribunal remitted the case to the Collector for reassessment of payable amounts, considering classification evidence and potential benefits under Notification No. 35/84-C.E. The Collector was instructed to recalculate penalties and uphold confiscation orders, leading to the decision in favor of the appellants in these terms.