TMI Blog1996 (11) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... on payment of a fine of Rs. 5 lakhs. 2. The brief facts of the case are that during the course of visit on 21-7-1990 by the Central Excise officers to the factory premises of the appellants, it was found that one high speed Stirrer operated by electric motor was installed in the processing unit along with other machines/equipment. A Panchnama was drawn according to which, it appeared that the following machines/equipments were operated with the aid of power: Water Pump: To fetch and pump water from storage tank to lofted tank for use in the processing of cotton fabrics. One high speed Stirrer: To prepare paste of water repellant composition in the Stirrer Laboratory equipments: 1. Breaking strength machine 2. Colour fastness testing machine 3. P.H. Meter 4. Hot plate 5. Iron 6. Oven 7. Laboratory Stirrer/Mixer The statement of Shri S.B. Mehta, Vice President of the appellant unit was recorded in which he explained the manufacturing process of cotton fabrics as under : The appellants purchase 100% cotton fabrics of different grey materials directly from Mills. Such grey fabrics are first dyed in jigger machine operated manually. Then the cloth is squeezed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their statements recorded on 7-6-1991, that one high speed electric Stirrer was used for stirring the chemicals evenly for preparation of paste for production of processed cotton fabrics. From the above, the Department charged the appellants with having processed 2092289.05 linear metres of cotton fabrics during the period 1-6-1986 to 8-8-1990 with the aid of power and with having wrongly availed of the exemption from payment of duty in terms of the 4 Notifications aforesaid and also charged the appellants with having concealed and suppressed the manufacturing process particularly manufacture of paste of chemical composition in high speed Stirrer operated with 3 H.P. motor in their declarations filed from time to time with the Central Excise authorities, thus attracting the extended period of limitation in terms of the proviso to Section 11A(1). A show cause notice was issued on 12-6-1991 proposing recovery of duty and imposition of penalty. The adjudicating authority rejected the contentions of the appellants that the use of high speed Stirrer was only for stirring of colours for the purpose of developing a fabric having pigment colour on one side white colour, and olive green co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (55) E.L.T. 444 SC (which has been relied upon by the Collector in the impugned order) wherein the expression used is in or in relation to the manufacture of which no process is ordinarily carried on with the aid of power . 3.3 The demand is barred by limitation. 4. Our findings are recorded below:- 4.1 Finding on Point 1 Water proofing and water repelling have been explained clearly in the book titled Technology of Textile Finishing by Prof. V.A. Shenai and Dr. Naresh M. Saraf as under : For certain uses such as tarpaulin, umbrella cloth, raincoat fabrics etc. water-proofing or water repellent effects are required. When a uniform coating of suitable substances such as rubber is produced on the surface of a fabric, the interstices between the warp and weft yarn are blocked by the continuous film of the substance and water will not pass through the treated fabric. However, in such a case, the treated fabric becomes impermeable to air also. If raincoats are made from this fabric, the movement of air through the fabric is prevented and the wearer becomes uneasy and uncomfortable. This type of finish is called water proof finish (both water and air are not allowed to pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed along with sodium stearate to increase the water repellent effect. This method, which involves two-bath application technique, is a long procedure. In order to shorten the procedure, a single bath process has been developed in which an emulsion of wax and aluminium stearate is used to obtain the water repellent effect. These are non-durable water repellents, since they do not have any affinity for the fibres, nor do they chemically react with the fibre substance, but are simply present on the fabric. They are not fast to washing and dry-cleaning. In water repellent finishing the individual fibres present in the fabric are coated with a continuous water impermeable film without at the same time binding the fibres to each other or blocking the interstices of the fabrics. These chemicals must be tough, pliable and elastic and must adhere to the fibres firmly. These hydrophobic film forming substances include acetates and soaps of aluminium and zirconium, ammonium zirconyl carborates, chlorinated paraffin waxes, microcrystalline waxes, methylol stearamide, stearamidomethyl pyridinium chloride, etc. Water repellent finishes are produced usually by the conventional pad dry techn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsist of the following : (a) The appellants obtain 100% cotton fabrics of different grades (grey fabrics). The grey fabrics are dyed in Jigger Machines operated manually. It is at this stage that colour is fastened on the grey fabrics. There is no dispute that the Jigger Machines are operated manually. (b) After the dyeing process is carried out in the Jigger Machines the fabric is squeezed in Mangle Machines and then dried over a drying range. The drying range uses high speed diesel. (c) The appellants purchase wax emulsions and other chemicals required for imparting water proof, water repellant or rot proof characteristics to the fabric. These chemicals and emulsions are required to be mixed in different proportions depending upon the type of end product desired. Consequently, these chemicals are mixed to form a paste. This mixing is carried out in cooking pans which are also operated manually and heated by using High Speed Diesel. (d) The paste prepared by the appellant in the cooking pans is then introduced into a Mangle Machine where the dried fabric is passed again. The paste gets absorbed into the fabric or forms a film on the fabric and thereby imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process as various chemicals and ingredients are incompatible in each case. In the case of pigment colours, one has to use thermoplastic or thermosetting resins for fixing of pigment dyes, the effect of which will be negatived if unfixable waxes or their emulsions are used in the same bath. It is, therefore, essential that all the water-proofing processes will have to be done separately. 4.1.1 The next piece of evidence is the cross-examination of Shri S.B. Mehta on 18-10-1993. He has stated therein that the high speed stirrer is not required for water proofing and that the stirrer was brought to the appellant s factory for producing two shade colour on different sides of fabrics and for 1 years various trials and experiments were carried out but failed and the stirrer was lying idle in their factory. In response to question No. 15, Shri Mehta has clarified that the part relating to the use of high speed stirrer in his statement dated 21-7-1990 is wrong because the facts relating to separate sections were mixed up and electric wires to the stirrer were also not there from the main point to the stirrer. Our attention is next drawn to the Book titled Technology of Printing by V.A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence the demand of duty is not sustainable and is hereby set aside. Point No. 1 is thus answered in favour of the appellants/assessees. 4.2 Finding on Point No. 2 Point 2 does not require to be answered in view of the above finding on point No. 1. 4.3 Finding on Point No. 3 Duty for the period 1-6-1986 to 8-8-1990 has been demanded in the show cause notice issued on 13-6-1991. The appellants submit that they had been filing the declarations regularly during the relevant period (pages 8.1 to 8.8 of supplementary paper book II) claiming the benefit of the Notifications in question on the ground that they were carrying out the process of dyeing, water proofing and rot proofing on 100% cotton fabrics without the aid of power or steam. They submit that, even assuming without admitting that the power operated stirrer was used for preparation of water proofing/water repelling paste, the non-declaration of the same was not with intent to evade payment of duty but was based upon a bona fide belief that the fabrics processed by them were not liable to duty in view of the judgment of the Hon ble Gujarat High Court in the case of Nirma Chemical Works and others v. Union of India and Ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Gujarat High Court in the Nirma case cited supra in the context of surface active agents cannot form the ground or basis for bona fide belief as the appellants processes on textiles were entirely different and, therefore, there is nothing to support the plea of bona fide belief and, therefore, in the face of the appellants deliberate mis-declaration that they were carrying on hand operated processes, suppression and wilful misstatement with deliberate intent to evade payment of duty is established to the hilt and, therefore, the demand is not hit by time bar. 4.4 We have considered the above submissions. In view of our finding on merits that the appellants did not use power operated stirrer for preparation of water proofing/water repelling paste for processing of fabrics, no question of suppression on their part arises. Moreover, the judgment of the Hon ble Gujarat High Court in the case of Nirma Chemical Works was the exposition of the law relating to use of power in supply of raw material in order to determine the eligibility to the benefit of Notification 101/66 which exempted organic surface active agents from the whole of duty of excise leviable thereon, if, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a new article known to the market from the raw materials which are also articles known to the trade or the market. The Court further held in para 17 that if no change is brought about in the raw material until it reaches the reaction vessel, then no process of manufacture can be said to have taken place until the raw materials are taken to the reaction vessel and merely because the goods are stored in one place, may be at an elevated place above the ground, it cannot be said that a process of manufacture which would convert the raw material by different stages into the final product has been undergone and unless and until some change takes place in the raw material of the original commodity, no process can be said to have gone through. It is pertinent to note at this stage that the factory of the appellants before us is situated at Ankleshwar, within the jurisdiction of the Hon ble Gujarat High Court. We also note that in the case of Chamundi Vastralankaran Udyog v. CCE, Meerut reported in 1987 (32) E.L.T. 131, the Tribunal had held that the use of motorized stirrer for mixing colours will not exclude printed silk sarees manufactured by the appellants from the benefit of Notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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