1998 (1) TMI 144 - AT - Central Excise

Summary

Issues: Classification of terry towels under Notification No. 65/87, dated 1-3-1987 for exemption from duty.

Detailed Analysis:

1. Facts of the Case:
The case involves the classification of terry towels manufactured by the respondents, who receive terry towelling cloth from their sister concern for processing. The cloth is manually cut and stitched to create terry towels, which the respondents claim should be exempt from duty under Notification No. 65/87, dated 1-3-1987.

2. Initial Decision:
The original authority did not accept the respondents' claim for exemption and classified the terry towels as dutiable, holding them liable to pay duty at 12% ad valorem.

3. Appeal and Lower Authority's Decision:
On appeal, the lower authority ruled in favor of the respondents, stating that the terry towels were manufactured without the aid of power, thus qualifying for the exemption under Notification No. 65/87. The lower authority set aside the original order and allowed the appeal.

4. Revenue Appeal:
The Revenue appealed the lower authority's decision, arguing that even though the cutting and stitching of the terry towels were done manually, the processing of terry towelling cloth and bleaching was done with the aid of power, disqualifying the terry towels from the exemption.

5. Counter-Argument by Respondents:
The respondents contended that the use of power in processing the terry towelling cloth did not extend to the manufacturing of terry towels. They argued that the manual cutting and stitching did not involve the use of power, making them eligible for the exemption under Notification No. 65/87.

6. Tribunal Decision:
The Tribunal agreed with the respondents, stating that the power used in manufacturing terry towelling cloth should not be considered in the manufacturing of terry towels. Therefore, the lower authority's decision to grant the exemption under Notification No. 65/87 for the terry towels was upheld.

7. Confirmation of Classification:
The Tribunal also noted that the dutiability of terry towelling cloth under a specific heading was not in dispute, further supporting the respondents' eligibility for the exemption under Notification No. 65/87.

8. Final Decision:
Consequently, the Revenue's appeal was dismissed by the Tribunal, upholding the lower authority's decision to grant the respondents the benefit of exemption under Notification No. 65/87 for the manufacturing of terry towels without the aid of power.

In conclusion, the Tribunal affirmed the lower authority's decision, emphasizing that the manual manufacturing process of terry towels without the use of power qualified the respondents for the exemption under the relevant notification, thereby dismissing the Revenue's appeal.