2005 (12) TMI 171 - AT - Central Excise

Wrongly availed the benefit of concessional duty - Fabrics of cotton and man-made fabrics - Demand - Limitation - Suppression of facts - HELD THAT - On our independent examination also we have clearly seen from the technical literature produced that the item PVA is not a raw material but it is a consumable. The Encyclopedia of Textile Finishing also clearly spells out that the Polyvinylalcohol dispersions is significantly decreased by heating treatment above 120 C application particularly for sizes finishes etc. The definition of sizing in Sevak s Dictionary of Textiles also shows that sizing is an operation carried out on warp yarn before weaving to increase the weaving efficiency by reducing the yarn breakage during weaving. It states that this is done by preventing the surface-protruding fibres of yarn. For this purpose the fibres extending along the yarn surface are coated with a thin layer of starch tallow china clay etc. It is carried out by immersing the yarn for a few seconds in a hot mixture of an adhesive (starch carboxy methyl cellulose polyvinyl alcohol etc.). A lubricant and softner C tallow emulsified vegetable oils and their solubilised products a preservative (pentachlorophenol sodium silicofluoride etc.). The yarns are then squeezed and dried. Hon ble Gujarat High Court in the case of Arvind Mills Ltd. v. UOI 1981 (7) TMI 78 - HIGH COURT OF GUJARAT AT AHMEDABAD has held that sizing is necessary for weaving purposes after the yarn is completely manufactured. It has held that sizing process is carried out to add some strength to the yarn to withstand stress and strain of weaving. The sizing so added is removed completely after weaving and bleaching process to make the fibre suitable for dyeing printing etc. This Bench in the case of Forbes Gokak Ltd. 2005 (7) TMI 234 - CESTAT BANGALORE has held that application of wax on the fibre is used as a consumable and not as raw material. In view of the material placed before us the contention of the appellant that PVA is not used as a raw material is required to be upheld. The appellants are entitled to the concessional benefit of the Notification in question. Further more the appellant had declared that they were using the material with full knowledge of the Department. Hence there is no suppression of facts for invoking larger period. The appeal is allowed both on merits as well as on time bar with consequential relief if any.

Summary

Issues: Alleged wrongful availing of concessional rate of duty, eligibility for benefit of notification, classification of PVA as raw material or consumable, time bar for demands

In this judgment, the appellants were accused of wrongly availing the concessional rate of duty for fabrics falling under Chapter 52 by utilizing imported Polyvinyl alcohol (PVA) 117 alongside indigenous raw materials, thereby allegedly disqualifying them from the benefit of a specific notification. The Revenue contended that the appellants' use of PVA rendered them ineligible for the notification's benefits. The Managing Director acknowledged manufacturing cotton and polyester cotton fabrics using indigenous yarn subjected to sizing and weaving processes, with clearances approved by relevant authorities. The Revenue's position was that PVA and acrylic binder were imported raw materials, disqualifying the appellants from the notification's benefits.

The appellants argued that PVA was a consumable, not a raw material, as it was washed off during the sizing process. They cited technical references and legal precedents to support their stance, emphasizing that PVA was not present in the final product. The appellants highlighted the necessity of washing off PVA before further processing the fabric, as per industry standards. They also pointed to past judgments where similar materials were deemed consumables, not raw materials.

The Tribunal carefully analyzed the technical literature and dictionary definitions presented, concluding that PVA 117 was indeed a consumable used in the sizing process. Drawing on legal precedents, the Tribunal distinguished cases where imported items were considered raw materials due to their presence in the final product, unlike PVA in this instance. The Tribunal upheld the appellants' argument that PVA was a consumable, not a raw material, based on the evidence presented.

Considering the Gujarat High Court's ruling on the necessity of sizing for weaving purposes and the Tribunal's past decisions on similar cases, the Tribunal sided with the appellants, affirming that PVA was a consumable. The Tribunal also noted that the appellants had declared their material usage to the Department, ruling out any suppression of facts for invoking a larger time period. Consequently, the appeal was allowed on both merit and time bar grounds, granting the appellants the concessional benefits of the notification in question.