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TMI Blog2002 (9) TMI 487X X X X Extracts X X X X X X X X Extracts X X X X ..... nal duty exemption for various machines imported by the appellants in terms of Customs Notification No. 29/97, dated 1-4-97. The goods under question have been imported under EPCG scheme for export of textile garments including knitted garments. The authorities below have rejected claims of appellants and hence these appeals. 4. Shri S. Murugappan, learned Advocate assisted by Ms. Prameela Vishwanathan, learned Advocate appeared for the appellants and took us through EPCG scheme provisions as outlined in Chapter VI of the relevant import and export policies for the period 1997-2002 and also provisions of Customs Notifications No. 29/97 referred above, in particular the proviso to the above notification specified that when the goods imported are required for the manufacture of textile garments (including knit wear) they are eligible for exemption from payment of additional duties. They argued that in all these cases, various machines imported by appellants are required for manufacture of textile garments including knitted garments, and therefore, they will be eligible for exemption referred above. It was argued that in the light of this, the lower authorities, rejection of the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rments/ knitted garments. (v) After import of these machines the appellants are using them in the manufacturing of garments and garments so manufactured were exported. Samples of shipping bills showing such exports with cross references to the relevant EPCG licences were submitted. The export of garments is spread over 5 years as per the licencing conditions and, therefore, the appellants have still time to comply with the conditions stipulated in the licences for export of knitted/textile garments. (vi) Therefore, the issue boils down to the interpretation of the expression used in the Notification, i.e. goods required for the manufacture of ..... textiles garments (including knitwear) . The machines imported are required for manufacturing of textile garments (including knitted garments) and the benefit of exemption is available to the appellants. There is no definition of manufacturing or the expression goods required for the manufacture either in the notification or in the customs tariff. In the absence of such definition, the meaning assigned to these words in common parlance should be taken into consideration. Reference to the decisions of the Hon ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and various stages of the production of the garments. (x) In the case of Rupa Co. Ltd. v. Commissioner of Customs, Kolkatta reported in 2002 (143) E.L.T. 562 (T) = 2002 (81) ECC 520 (T), similar question of levy of additional duties in terms of the very same notification was examined. In this case the Hon ble Tribunal observed that the interpretation that only machines which are used directly in the manufacturing of textile garments will be eligible for additional duty exemption is not correct. In the light of the above and under law the various machines imported by manufacturers are required for manufacturing of knitting garments. (xi) The Supreme Court in the judgment relating to J.K. Cotton case referred to (supra) has clearly laid down that where any particular process is so integrally connected with the ultimate production of the goods that but for that process manufacture or processing of goods would be commercially inexpedient, goods required in that process would fall within the expression in the manufacture of goods . It was emphasised that in the present case it would not be commercially expedient to manufacture garments without making own fabrics. (xii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. referred to by the appellants it is noticed that the production of knitting garments started with the inspection and reversal of fabric. In case the fabric is already dyed or compacted then such machinery are not to be allowed additional duty exemption. (viii) Machineries for processing should not be allowed in respect of cases where the garments are manufactured on job work basis. 6. The learned D.R. has also submitted a written submission along with enclosures. In his re-joinder the learned Advocate appearing for the appellants submitted as under : (1) The classifications under the first schedule to the Central Excise Tariff Act, 1985 are not relevant in the present case. It may be that fabric is classified under one chapter and garments are classified under another chapter but that does not answer the question whether in the manufacture of the garments, fabric production is a process. (2) Even as per the provisions of EPCG scheme exports through 3rd party is allowed subject only to the condition that the machines imported under the scheme should be used for the manufacturing and the export of the finished goods. Neither the policy nor the notification pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption from payment of additional duty to all machines. By issue of Notification 71/97-Cus., dated 16-9-97, 10% additional duty was imposed. However, exemption was made available in respect of goods required for manufacturing of leather garments, textile garments including knit wear. The exemption from payment of additional duty was provided for these products for the reason that the manufacturers of these goods were not under Central Excise and, therefore, 10% additional duty will not be available as Modvat credit. During the relevant period, the activities of the production of knitting fabrics and production of knitting garments did not attract excise levy. 7. We have considered the rival submissions. The short point for determination in these appeals is the scope of the expression goods required for the manufacture of as it appears in the Notification 29/97 and whether it will include the knitting machines and processing machines for making knitted garments. The learned Adv. appearing for the appellants have pointed out that in the circular dated 22-2-2000 issued by the CBEC it was clarified that the additional duty exemption is to be extended only to machines which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted sample copies of shipping bills showing export of knitted garments. It was further submitted that the appellants have to submit periodical statements to the licensing authorities showing the details of the machines imported; goods manufactured and exported and the extent of export obligation completed. On completion of export obligation the appellants have to submit the full details to the licensing authorities as well as customs authorities evidencing export of goods specified in the licences to get the bond or undertaking cancelled. Therefore, the issue is limited to the question whether process of knitting of fabrics and the various processes done on the fabrics can be considered as essential process for manufacture of knitted garments, and therefore, these equipments used in such processes are goods required for manufacturing of knitting garments. 10. The learned Adv. appearing for the appellants relied upon extensively on the Supreme Court judgment in the case of J.K. Cotton Mills (supra). In this case the Hon ble Supreme Court observed that the expression in the manufacture of goods should normally encompass the entire process carried on by the dealer of converting r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e operation performed on it or in regard to it, such operation would amount to processing of the commodity. But it is only when the change or a series of changes take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place. (12) Manufacture thus involves series of processes. Process in manufacture or in relation to manufacture implies not only the production but the various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected to, manufactured product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. Where any particular process is so integrally connected with the ultimate production of goods that but for that process manufacture or processing of goods would be impossible or commercially inexpedient, that process is one in relation to the manufacture. 12. These two judgments coupled with the other judgments given by the High Court at Mumbai and this Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion sequence of fully cut garments In the above process as well as processes described at pages 13, 16 and 17 the production sequence starts with knitting. Further at page 39 of the book it is stated that the companies making garments knit their own fabric and then carry out further processes. In the light of the clear position as stated in the above book written by one of the former head of the department of Fashion and Textiles, we agree with the contention of the appellants that the manufacture of the knitted garments starts with knitting. The decision of the Kolkatta Bench of this Tribunal in the case of Rupa Co. is limited to other machines which are used for processing. We have also noted that the DGFT has issued circular No. 52/99-2000, dated 18-2-2000 and which has referred to these machines under Annexure -III as machines used for garment sector. Thus for the reasons stated above and in the light of the Supreme Court judgments relied upon and Tribunal s decision in the case of Kudremukh Iron Ore Ltd., Rupa Co. and Ruia Kotex Ltd. reported in 2002 (103) ECR 925 (Tri) machines under question are to be considered as goods required for the manufacture of textile gar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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