TMI Blog1986 (6) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... age, a clarification was sought by the company from the Department but on a hypothetical note stating that they were planning the manufacture of tarpaulin in their mills and not that they were already engaged in such manufacture. It is alleged that the appellant company had failed to pay appropriate excise duty on the tarpaulins manufactured in their Agencies Division from the period June 1980 to February 1985, thus evading duty amounting to Rs. 47,64,964.04. 2. Shri P.K. Kurien, Advocate appears on behalf of the appellant company and states that the tarpaulin on which the duty has been demanded from the appellant company is manufactured out of proofed canvas by cutting into sizes, stitching and fixing eyelets. The proofed canvas is cotton fabric falling under Item 19 of the Central Excise Tariff. It is stated that the grey canvas had already paid duty and, therefore, tarpaulin could not be subjected to any further duty. It is urged that tarpaulin is, in fact, a proofed canvas which is specifically covered under Item 19 of the Central Excise Tariff. Therefore, the question of its attracting Item 68 of the Central Excise Tariff does not arise. 3. The appellants stand is that pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g case of law in their favour. 1. Union of India and Others v. Delhi Cloth and. General Mills Co. Ltd. and Others - 1977 E.L.T. (J-199). 2. South Bihar Sugar Mills Ltd. and Another Etc. v. Union of India and Another Etc., and Tata Chemicals Ltd., Bombay v. R.M. Desai, Inspector, Central Excise, Mithapur and Others - 1978 E.L.T. (J-336). 3. Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. PIO Food Packers - 1980 E.L.T. 343 (SC) = 46 STC 63 (SC). 4. Deputy Commissioner of Agricultural Income Tax and Sales Tax, Quilon v. Travancore Rubber Tea Co. - 20 STC 520 (SC). 8. Shri Vineet Ohri, SDR appears on behalf of the Department. He reiterates the views expressed in the Order-in-Original. He emphasises that the goods on which duty has been demanded viz., tarpaulin, do not find place in Items 1 to 67 of the then Central Excise Tariff and, therefore, it is rightly concluded that they would fall under Tariff Item 68 of the Central Excise Tariff. It is stated that there is no dispute, that bought out grey cotton canvas was processed by water proofing and this proofed canvas was cut and stitched into different sizes and then eyelets fixed thereon acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Madras High Court judgment in Navinchandra Co. (supra). It is further stated that the respondent has wrongly and illegally relied on Madras High Court decision in the case of M. Jeevajee Co. (supra), when the Madras High Court itself did not follow its earlier decision in two later cases, Narsimha Agencies (supra) and South India Traders (supra). 13. We have carefully considered the above case law cited by the appellant in their favour. In the case of Porritts Spencer (Asia) Ltd. (supra), the Supreme Court held that dryer felts manufactured by the assessee are a variety of textiles. It was held that they would satisfy the common parlance test. It was further observed that the concept of textile is not a static concept and newly developing materials, methods, techniques and processes are continuously evolving and new kinds of fabric invented which could legitimately be regarded as textiles without doing any violence to the language. It was further held that textiles may have diverse uses and it is not use which determines their character as textiles. The Supreme Court observed. It is, therefore, no argument against the assessee that dryer felts are used only as absorb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process. 17. Again a reference is made to the Madras High Court decision in the case of the State of Tamil Nadu v. Venus Trading Company 55 STC 345, in which it was held that stove wicks having been fabricated out of cotton would fall within the expression cotton fabric . It was held that Entry 19 of the first Schedule to the Central Excises and Salt Act, 1944 is an inclusive entry and though it may be that some of the articles included therein under cotton fabrics may not be in common parlance be so known or called, nevertheless Entry 19 is so defined as to take within its sweep cotton fabrics popularly known and recognised as such as well as other kinds of fabric. It was held that the bonding together of cotton fabrics in the shape of a wick by a process of braiding leads to a pattern and a product of utility and even if the end-product is not obtained by resorting to weaving as commonly understood, nevertheless, it would be a fabric resulting from the bonding of cotton fibres by a process of braiding. Therefore, cotton stove wicks would squarely fall within cotton fabrics in Entry 19 of the First Schedule to the Central Excises and Salt Act, 1944. 18. In the case of N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in the case of Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. PIO Food Packers (supra). In this case, it was held by the Supreme Court that when a pine apple fruit was processed into pine apple slices for purpose of being sold in sealed cans, it did not involve a process of manufacture. It was held that where there was no essential difference in identity between the original commodity and the processed article, it was not possible to say that one commodity had been consumed in the manufacture of another. Although, it had undergone a processing, it must be regarded still as retaining its original identity. 22. Appellants have also referred to the decision of the Supreme Court in the case of Union of India and Others v. Delhi Cloth General Mills Co. Ltd. and Others 1977 E.L.T. (J199). In this matter, it was decided by the Supreme Court that mere processing of goods is not manufacture, attracting further duty. It was held that every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation and a new and different article must emerge having a distinctive na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt held again that water proof cloth such as rexine, PVC cloth, rubberised or synthetic water proof fabrics, etc. made with cloth as a base, are not textiles, inasmuch as the processed article had different properties and characteristics and are intended for different use and in commercial circle they are treated as entirely different from cloth or textile. It was held that the proper text would be to find out whether after the application of rubber or PVC solution, the base cloth continues to be cloth or whether it has become a different product intended for a different use. 26. In the case of Porritts Spencer (Asia) Ltd. v. State of Haryana, the Supreme Court of India, however, held that the word textiles must be interpreted according to its popular sense and the use to which it is put is immaterial and does not bear on its character as a textile. Holding that the concept of textile is not static concept. It was further added that having regarding to the newly developing material, methods, techniques and processes, new kinds of fabric may be invented which, without doing any violence to the language may be regarded as textiles. It is in this context that it was decided by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Salt and Additional Duties of Excise (Amendment) Act, 1980 (being Act No. 6 of 1980) which came into force on and from 24th November, 1979. Prior to the amendment, Item No. 19 of the Central Excise Tariff read as follows:- Cotton fabrics means all varieties of fabrics manufactured either wholly or partly from cotton and includes dhoties, sarees, chadders, bed-sheets, bed-spreads, counter-panes, table cloths, embroidery in the piece, in strips or in motifs and fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials, if (i) in such fabrics cotton predominates in weight, or (ii) such fabrics contain more than 40% by weight of cotton and 50% or more by weight of non cellulose-fibres or yarn .or both; Provided that in the case of embroidery in the piece, in strips or in motifs and fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials, 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 as the case may be. I. Cotton fabrics other than (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amendment of First Schedule - In the Additional Duties of Excise (Goods of Special Importance) Act, 1957, in the First Schedule - (i) in item No. 19 for sub-item 1, the following sub-item shall be substituted, namely - 1. Cotton fabrics, other than (i) embroidery in the piece, in strips or in motifs, and (ii) fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials - (a) cotton fabrics not subjected to any process. Five per cent ad valorem . (b) cotton fabrics, subjected to the process of water-proofing, rubberising, bleaching, mercerising, dyeing, printing, shrink-proofing organdie processing or any other process or any two or more of these processes. 31. Simultaneously, with the amendment of the Tariff, an amendment was made of Section 2 in the Central Excises and Salt Act, 1944. In Section 2, in Clause (f), after sub-clause 4, the following sub-clause was inserted- In relation to goods comprised in Item No. 19 - amendment of First Schedule includes bleaching, mercerising, dyeing, printing, water-proofing, rubberising, shrink-proofing, organdie processing or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court in its decision in the case of Satyavijaya Commercial Co. decided in January, 1983. In the Order-in-Appeal, the Collector has chosen to rely on the decision of the Madras High Court in the case of M. Jeevajee Co. The judgement in the case of M. Jeevajee Co., was delivered in July 1973 i.e., much before the retrospective amendment effected in 1979. Quite obviously, therefore, the ratio of decision in the case of M. Jeevajee Co. would not remain valid after the amendment of 1979. For the same reason, the judgement in the case of State of Tamil Nadu v. East India Rubber Works, Madras delivered on the same date as the judgement in the case of M. Jeevajee Co. (supra) cannot afford any guidance in the interpretation of Central Excise Tariff after the retrospective amendment of 1979. 36. The learned SDR has cited the decision of the Supreme Court in the case of Empire Industries Ltd. and Others v. Union of India and Others. There is nothing in this decision which is contrary to the view taken in the cases of Pokardas Bros. v. State of Gujarat, and Satyavijaya Commercial Co. v. State of Maharashtra (supra). In fact, the Supreme Court in the case of Empire Industries L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of M. Jeevajee and Co. is to the effect that tarpaulin (the cut-to-size, stitched and eyeletted product) is a marketable commodity different from the fabric out of which it had been made. It further held that this product is not sold as a textile and does not continue to have the properties and characteristics of cloth. The decision of the Gujarat High Court in the case of Pokardas Brothers also deals with the same product (tarpaulin). The judgment of the Madras High Court above cited was taken into consideration by the Gujarat High Court but not followed for the reason that the Madras High Court decision was based, inter alia, on the user test, but that the Supreme Court had in the case of Porrits Spencers (Asia) Ltd. disapproved the application of the user test in case of determination of the question as to what goods can rightly be classified as textiles. This decision of the Gujarat High Court had been later referred to with approval, and followed, by the Bombay High Court in the case of Satya Vijay Commercial Co. v. Commissioner of Sales Tax (55 STC 186). It had been held therein that tarpaulin manufactured out of cotton fabric fell under Entry No. 15 of ..... 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