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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 ..... e 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 which constituted manufacture. 2. In adjudication, the Commissioner found that the process of padding with starch and chemicals and special processes undertaken by SSM did not impart a characteristic of lasting nature to the fabrics. As per Board's Circular No. 52/10/89-CX1 dated 18-10-1989 and clarification dated 24-10-1989, assessees could avail exemption when padding process was undertaken using starch and chemicals. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 fabrics. The effect of the processes undertaken by the respondents did not remain after one or two washes. As per Tariff Advice No. 36/84 dated 27-7-1984, padding solution containing ingredients like small amount of optical whitening agent, wetting agent, and fillers like china clay would also be covered by the term pad ding in Notification 253/82 dated 8-11-1982. The Commissioner ascertained the transient nature of the effect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eport 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 that the impugned processes undertaken by the respondents did not amount to manufacture. The issue in dispute was not whether these processes are covered by the exemption notification. Liability to duty of a product was not determined on the basis of an exemption but on the question whether the process was one of manufacture. 4.8 The ld. SDR reiterates the findings in the impugned orders. 5. We have carefully considered the case records and the rival submissions. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 lungi fabric. Alleged special processes also are found to render the fabrics sheen and softness. These also do not impart any effect of a lasting character. 5.3 As regards mercerizing found against SSM in the Show Cause Notice, the Commissioner concluded that the proposal was rooted in a mis-reading of over-written entries in the records of SSN. There is no other evidence to establish that respondents had cleared mercerized fabrics. 5.4 As per Note 3 to Chapter 52 of the tar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring, 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. By applying starch with some chemicals and the special process identified, the fabrics acquire the quality of stiffness and sheen which vanishes after a couple of washes. Such a process which does not bring into existence goods with a new name, properties or uses cannot be held to be manufacture. Apex Court has found that the Note 3 to Chapter 52 does not in effect lay down a deeming provision as regards manufacture. Therefore the impugned goods cannot be subjected to further duty liability on account o ..... 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