9911796707
TMI Blog1990 (9) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 2 manufactures foundation cloth by subjecting cotton fabrics to a number of processes. Petitioner No. 2 company then returns the foundation cloth to petitioner No. 1 company for the manufacture of card clothing. 2. Petitioner No. 2 company which is manufacturing foundation cloth classified the said manufacture initially under Tariff Item No. 19-I(b) of the First Schedule to the Central Excises and Salt Act, 1944 (hereinafter referred to as the 'Act'). Petitioner No. 2 company before any clearance was made realised that an error was committed in classifying the foundation cloth and thereupon by letter dated October 3,1980 addressed to the Superintendent of Central Excise submitted a fresh classification list classifying foundation cloth under Tariff Item No. 68 which is a residuary item under First Schedule to the Act. The Asstt. Collector by communication dated November 29, 1980 informed petitioner No. 2 that the classification under Tariff Item No. 68 is approved. On February 16,1981, the Assistant Collector of Central Excise, Pune informed petitioner No. 2 company that the question of classification of foundation cloth stands reopened and the company should file reply, if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproved by the Assistant Collector and held that the product 'foundation cloth' should be reclassified under Tariff Item No. 16-I(b) of the First Schedule. The petitioners, thereafter, amended the petition and challenged the order passed by the Collector of Central Excise. 4. Mr. Setalvad, learned counsel appearing on behalf of the petitioners, submitted that the order passed by the Collector on September 2, 1982 is contrary to the well-settled principles and the classification of foundation cloth under Tariff Item 19- I(b) is entirely incorrect. The learned counsel urged that the Collector examined the question on misconception that the burden to establish that foundation cloth is liable to duty under Tariff Item No. 68 is upon the assessee. Mr. Setalvad also submitted that the Collector did not appreciate that foundation cloth cannot be treated as cotton fabric for the purpose of levy of duty under Tariff Item No. 19-I(b) as after the process undertaken by petitioner No. 2 company, the product which comes into existence is totally distinct and different from cotton fabric. As cotton fabric loses its identity and a new product 'foundation cloth' comes into existence, the Collect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials and fabrics covered partially or fully with textile flocks or with preparations containing textile flocks, if (i) in such fabrics cotton predominates in weight, or (ii) such fabrics contain more than 40 per cent by weight of cotton and 50 per cent or more by weight of non-cellulosic fibres or yarn or both : Provided that in the case of embroidery in the piece, in strips or in motifs, fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials, and fabrics covered partially or fully with textile flocks or with preparations containing textile flocks, such predominance or percentages, as the case may be, shall be in relation to the base fabrics which are embroidered or impregnated, coated or laminated or covered, as the case may be- I. Cotton fabrics, other than (i) embroidery in the piece in strips or in motifs, (ii) fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials and (iii) fabrics covered partially or fully with textile flock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of manufacture of foundation cloth loses its identity cannot be made dependent upon visual inspection of the Collector. It is undoubtedly true that in manufacture of foundation cloth, cotton fabric is one of the ingredients, but it is a far cry to suggest that cotton fabric retains its identity even after the foundation cloth comes into existence. To determine as to whether the foundation cloth retains its identity and known as 'cotton fabrics' the petitioners relied upon letter dated February 23,1982 addressed by M/s. B. Maganlal Goolabchand Sons of Pune. This letter was written in answer to the enquiry made by petitioner No. 1 company by communication dated February 12,1982. M/s. B. Maganlal Goolabchand Sons are dealers in textile fabrics of various types, including cotton fabrics, for over 50 years as agents of M/s. Binny Ltd., a well-known manufacturing company of cotton fabrics. Petitioner No. 1 company forwarded samples of foundation cloth and enquired whether M/s. B. Maganlal Goolabchand Sons could supply such foundation cloth. M/s. B. Maganlal Goolabchand Sons were also requested to furnish names and addresses of traders who could supply foundation cloth. In a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon Tariff Item No. 19-I(b) to urge that when cotton fabric is subjected to the process of rubberisation, it would still retain the identity of cotton fabric and is liable to payment of excise duty under Tariff Item No. 19-I (b). It was urged that the manufacture of foundation cloth is nothing but coating layer after layer of rubber on cotton fabric. The submission is not correct and it is not accurate to suggest that the process undertaken for manufacture of foundation cloth is nothing but putting layers after layers of rubber on cotton fabric. As pointed out hereinabove, the process is a complicated one and foundation cloth comes into existence after several steps are taken. Tariff Item No. 19-I(b) comes into play when cotton fabric is subjected to process of bleaching, mercerising, dyeing, printing, water-proofing, rubberising, shrink-proofing, organdie processing or any other process or any two or more of these processes. What is crucial to be understood is that in spite of these modes of processing, cotton fabric does not lose its identity. The processes set out under tariff item like bleaching, mercerising, dyeing, printing, etc. are only to increase the value and utility o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case also, the final product, viz., foundation cloth which is produced by fusion of various layers with fabrics dipped in a special type of solution loses its identity as cotton fabric and, therefore, cannot fall within the expression of 'cotton fabrics' under Item No. 19-I(b). The Collector in the impugned order bypassed the decision of the Government on a specious ground that the decision was in relation to Tariff Item No. 19-III and, therefore, has no application. The Collector should have realised that the decision is relied upon to establish as to how Tariff Item No. 19 is not attracted when cotton fabric loses its identity after undergoing complicated process. In our judgment, the order of the Collector in these circumstances cannot be sustained as the conclusion reached by the Collector is almost perverse. The entire approach of the Collector proceeds on the misconception that the burden was upon the assessee to establish that duty is not payable under Tariff Item No. 19-I(b). Once it is found that the manufacture of foundation cloth is not liable to payment of duty under Tariff Item No. 19-I (b), then the liability to pay duty arises only under residuary Item No ..... X X X X Extracts X X X X X X X X Extracts X X X X
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