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TMI Blog2008 (2) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... g under the CSH. 52.06 of Central Excise Tariff processed and cleared by the respondents. Following intelligence received, premises of SSM were searched on and the processed lungi fabrics of value Rs. 46,830.74 were seized. The declared processes undertaken by the respondents were curing, scouring, stentering, calendaring etc. Scrutiny of the private records of the respondents revealed that the respondents had subjected the impugned fabrics to chemical padding and special finishing. The exemption contained in Notification No. 253/82 dated 8-11-1982, was not available to goods which were subjected to processes other than those specified in the notification. The processes such as padding with chemicals and special finishing processes were not specified in the notification, The highest amount proposed to be demanded from the respondents pertained to SSM. SSM was alleged to have undertaken also the process of mercerizing which disqualified their clearances of lungi fabrics for the exemption under the said notification. Therefore, we examine in detail the eligibility of SSM to the exemption first. After due process of law, the Commissioner decided that SSM did not undertake any process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed order which dropped the demand of duty of Rs. 2,14,87,266.67 on processed cotton polyester fabrics, demand of differential duty of Rs. 46,830.74 on the seized goods and did not impose penalties under Section 11AC and Rule 173Q. 4. In the written submissions filed by the respondents it is submitted that the activity of stentering alone was undertaken on the lungies. Stentering machine was different from padding machine. All the processes cited in the Notification 253/82-C.E. wore off. The same was not true in the case of processes like printing, bleaching, dyeing, mercerizing, waterproofing and organdie processing which imparted lasting character on the fabrics. Special finishing was not a process amounting to manufacture. It referred only to the softness of the fabric and had no other meaning. 4.1 The impugned processes did not amount to manufacture and were covered by Notification No. 253/82 for exemption. As per the various case law relied on by the Commissioner, in order for a process to constitute manufacture, it should impart a new and lasting character to the fabrics. It is not the case of the department that the processes undertaken impart lasting character to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sealed sample drawn and furnished to the respondents by the department. Department had drawn the sample on 19-9-89 (test memo No. 2/89 for chemical analysis). Despite several reminders, Department had not divulged the result of test. Therefore, the respondents had approached SITRA. 4.5 As regards mercerizing, the Commissioner held that mercerizing was not feasible on the dyed fabrics and the said process could only damage the dyed fabrics. The test report of SITRA categorically confirmed that the process of mercerizing was not done on the fabrics. These were not controverted in the appeal. The Commissioner found that the overwriting in the mercerizer note book was more by mistake and no motive could be assigned. 4.6 Special finishing was a generic term used for conveying softness and glow achieved through curing, scouring, padding and stentering processes. The Commissioner had taken a considered view that providing special finishing did not disqualify the lungi fabrics for the exemption. 4.7 The ld. Counsel for the respondents relied on the findings of the Apex Court in Siddheswari Cotton Mills Pvt. Ltd. v. UOI reported in 1989 (39) E.L.T. 489 (S.C.) in pleading tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed only to achieve a temporary effect of sizing (stiffening) and gloss, and addition of wetting agent, optical whitener, fatty matter and fillers were meant only to help padding process so as to give a temporary brightness to sized fabrics, to soften the starchy film left on the fabric and to give a better and fuller appearance. These additives got removed from the fabrics when the starch was washed up. It was decided that padding solution containing ingredients like small amount of optical agent, wetting agent, fatty matter and fillers like china clay, would also be covered by the term padding referred to in Notification No. 253/82 dated 8-11-1982. In Circular 16/CE/89-CX1 dated 24-10-1989, it was clarified that padding with Taffinol Anu alone, without starch would not be eligible for exemption under Notification No. 152/82. 5.2 In the review order of the Board, it is averred that the processes mentioned in the Notification No. 153/82 did not impart a lasting characteristic. The effects wore off in case of all processes. Thus the Revenue does not contest the finding that the process of padding with starch solution does not impart a permanent character to the cotton polyester l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver no such exemption shall apply if such cotton fabrics are subjected to any process or processes specified in the said table within the same factory in which they have been subjected to any process other than the processes specified. The following is the table. 1. Calendering 2. Flanellete raising 3. Stentering 4. Damping on grey and bleached sorts 5. Black-filling on grey and bleached sorts 6. Singeing, that is to say, burning away of knots and loose ends in the fabrics 7. Scouring, that is to say, removing yarn size and natural oil found in cotton 8. Cropping or butta cutting 9. Curing or heat setting 10. Padding, that is to say, applying starch or fatty material on one or both sides of the fabric 11. Expanding Hydro-extraction with the aid of power, that is to say, mechanically extracting or mechanically squeezing out water from the fabric. 6.1 In deciding the issue, the only relevant question is whether padding with starch and the special processes involve a process amounting to manufacture as defined in the Section 2(f)(v) of .the Central Excise Act. That the exemption notification does not cover or cover a process for exemption is not material. B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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