1998 (9) TMI 161 - AT - Central Excise

Summary

Issues: Duty liability on embroidered cotton fabric under Notification No. 255/89-C.E.

Analysis:
The case involved a dispute regarding duty liability on embroidered cotton fabric under Notification No. 255/89-C.E. The authorities sought to charge duty on the goods under the said notification. The notification exempted cotton fabrics from excess excise duty under certain conditions. The contention arose whether duty liability should be discharged by the appellants who received the embroidered fabric for processing. The appellants argued that duty on the embroidered fabric should be borne by the manufacturer who carried out the embroidery on the base fabric. They emphasized that they did not manufacture either the base fabric or the embroidery, and duty liability did not devolve on them. The lower appellate authority noted that duty liability had been discharged on the goods before receipt by the appellants. The appellants contended that any duty liability on the embroidered fabric should be collected from the manufacturer. The learned Advocate for the appellants highlighted that the process of dyeing undertaken by the appellants did not create a new product, as the goods still fell under the description of Tariff sub-heading 5805.13.

The learned SDR opposed the appellants' contentions, arguing that after dyeing, the goods would become dyed embroidered fabric, creating a new commodity falling under a different tariff heading. However, the appellants reiterated that they did not manufacture the base fabric or the embroidery, and the process of dyeing did not change the nature of the goods. The Tribunal carefully considered the arguments from both sides and agreed with the appellants. It was observed that the appellants did not manufacture the embroidery or the base fabric, and they were only processing the grey embroidered fabric. Any duty liability on the embroidered fabric should be collected from the manufacturer, not the appellants. The Tribunal concluded that no duty liability devolved on the appellants, and the appeals were allowed, setting aside the impugned order with relief to the appellants. The decision emphasized that the duty liability on the fabrics depended on whether the embroidered cotton fabric had already discharged its duty liability at the grey stage.