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TMI Blog2001 (5) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... bout its classification under Chapter Heading 60.01. It is processed. Duty on the processed fabrics is paid. The appellant received duty paid processed fabrics in its factory. It is then cut to size and edges hemmed with sewing machine. Revenue was of the view this activity amounts to manufacture and made up article classifiable under Chapter Heading 63.01 is produced in terms of Note 5 of Section XI. The demand of duty in the present case relates to this activity. The Department alleged that the appellants had manufactured and removed clandestinely made up articles without obtaining registration etc. During investigation statements of S/Shri B.R. Pandey, Manager, Amitabh Tiwari, Manager Works and Pradeep Waikar, Accountant were recorded. It was alleged that made up articles are classifiable under Chapter Heading 6301 and hence dutiable. Accordingly, a SCN was issued to the appellants asking them to explain as to why the tere-towels manufactured by them should not be classified under Chapter Heading 6301 and why duty should not be demanded from them under Rule 9(2) and proviso to Section 11A(1) and why penalty should not be imposed. In reply to the SCN, the appellants submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs only) is imposed upon notices under Rule 173Q of the Central Excise Rules, 1944. (B) Show Cause Notice No. V(63)15-35/94/Adj dated 2-11-1994 (i) Central Excise Duty amounting to Rs. 64,522.80/- payable on towels valued Rs. 6,45,228/- is confirmed for recovery under Rule 9(2) of the Central Excise Rules, 1944 read with proviso to Section 11A(1) of the Central Excise Act, 1944. (ii) A penalty of Rs. 30,000/(Rupees thirty thousand only) is imposed upon the party under Rule 173Q of the Central Excise Rules, 1944. (C) Show Cause Notice No. V(63)1701/CL/94/CVC dated 13/14-7-1994 (i) the classification of towels should be under Chapter 63 and attracts the appropriate rate of duty . Being aggrieved by this order, the appellants have filed these three appeals. 4. Arguing the case for the appellant Shri V. Sridharan, ld. Counsel submits that the applicants do not dispute the classification of the product under Chapter Heading 6301. He also concedes that the demand of differential duty for the period 1-3-1994 to 31-3-1994 is sustainable in law. Ld. Counsel submits that the main contention was that the appellants are manufacturer of tere-towels. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een examined in consultation with the Ministry of Law. The Min. of Law has opined that in order to avail of the exemption for goods mentioned in Notification No. 179/77 no process of manufacture should have been conducted with the aid of power. However, exemption from payment of Excise Duty as a finished product can be availed of even if power has been used in the process of manufacture provided the raw material/component parts are by themselves excisable (including those which are exempted from excise duty) irrespective of the premises on which those parts are manufactured. 6. Ld. Counsel also referred to Board Circular No. 3/87, dated 19-6-1987 wherein it was clarified that In the case covered by the aforesaid Supreme Court judgment (M/s. Standard Fire Works Industries, Sivakasi) manufacturers of fire works claimed exemption in terms of Notification No. 179/77-C.E. in respect of fire works manufactured by them. The raw materials consisted of paper, chemicals, iron filings, coal, guns, steel wires etc. The steel wires were sent to the manufacturer of different persons to be cut to size the similarly, paper was made over to outsiders or being shredded into small strips and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether power has been utilised. The fact of the same having been manufactured without the aid of power has not been disputed by the Revenue. The Revenue only contends that the bonder has been manufactured by the job worker by using electricity and therefore, the assessee would not get benefit. We are not in a position to appreciate the argument of the Revenue as the job worker is an independent manufacturer and the goods have already left the premises on payment of duty. The processes carried out at the assessee s premises has not been done with the aid of power. Therefore, the Commissioner s findings that the Notification No. 179/77 as amended is totally justified and legal. In this regard, we also note the judgment rendered in the case of C.C.E. v. Indian Thermit Corpn. Ltd. as Final Order No. E/387/93-B1, dated 16-11-1993 wherein a similar case, the Tribunal has held that the assessee therein was entitled to the benefit of the notification in question as the goods were manufactured without the aid of power. Similar view has been expressed in the case of Kumar Brothers v. C.C.E. as reported in 1996 (84) E.L.T. 299 (Tribunal). We take note of another unreported case as rendered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tegrally connected with the further portion which results in the emergence of manufactured goods and such portion is carried on with the aid of power, the process in or in relation to the manufacture must be deemed to be one carried on with the aid of power. However, in the instant case, manufacture of alternators is an independent manufacturing activity being carried out by the appellants. In view of our discussion above, we hold that the exemption under Notification No. 179/77-C.E., dated 18-6-1977 was available to the appellants. 11. The appellants claim that the alternators manufactured by them and consumed captively in the manufacture of the gen sets were entitled to exemption under Notification No. 118/75 is also liable to be accepted. The alternators at the relevant time were classifiable under Tariff Heading 68 of the Central Excise Tariff; a part of the alternators was undoubtedly being used in the further manufacture of gen sets in the appellants own factory. Accordingly, we hold that the benefit of Notification No. 118/75 was available to the appellants in respect of the captively consumed alternators . Ld. Counsel submits that their case is fully covered by the rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that in the process of manufacture of tere-towel, power was used. Ld. DR submits that it has now been admitted by the appellant that tere-towel is a made up article classifiable under chapter heading, 6301. Ld. DR submitted that power no doubt was used at the stage of knitting the yarn into fabrics and subsequently in processing the fabrics and since power was used the benefit of notification was correctly denied. He submitted that the demand is not time barred and that interest is chargeable. Ld. DR submits that evasion of duty was deliberate and hence penalty is imposed, he reiterates the findings of the authorities below. 12. On careful consideration of the submissions of both the sides and the case law cited and the evidence on record, we find that the classification of the product was not disputed before us. The appellant has accepted the classification of the product manufactured by them under Chapter 63. Therefore, the only dispute that is posed before us for decision is whether tere-towels are entitled to the benefit of Notification No. 65/87 or not. We find that tere-towels are manufactured from processed knitted fabrics. Grey fabrics are knitted on pile knitting ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cutting of running knitted processed fabrics does not make the goods marketable because for levy of duty or being termed as goods , they must be marketable. Fabrics cut into small length in the instant case need further processes i.e. the process of hemming and the stitching, no evidence is placed before us or brought on record that the goods were being marketed after cutting. Since they become marketable only after stitching and hemming and process of stitching and hemming cannot be termed as incidental or ancillary to the process of cutting, therefore, they cannot be termed as manufacture. In this view of the matter, we allow the appeal of M/s. Dhvani Terefabs (Exports) and reject the appeal of Revenue. 14. On careful consideration of the submissions made we hold that demand for the period 1-3-1994 to 31-3-1994 is not hit by limitation. 15. We further note that interest has been demanded for the period prior to 28-9-1996. We note that provision for charging of interest was brought on the statute book on 28-9-1996. Since the demand is for the period prior to 28-9-1996, therefore, no interest is chargeable. 15. We have carefully considered the submissions about the penalty, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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