TMI Blog1990 (4) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the appellants started his arguments with the observation that Grey Fabrics viz. unprocessed were exempt in terms of Notification No. 109/86 dated 27-2-1986 which is given under Chapter 58. Knitted acrylic fabrics falling under Heading 6001 would be exempt from basic excise duty and additional duty of excise leviable under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 if the woven fabric is exempt from the said duties. They have only knitting machines. They do not have any processing machine. They send the fabrics manufactured by them for shearing to an outside place namely M/s. Sambhav Processors. Their contention that they did not have the processing facility in their premises and did not carry out the shearing or cropping process in their factory would derive support from the fact that the Department did not ask them to take a licence for the processing work, even after the registration of the impugned proceedings. He strongly pleaded that the seizure was made not from their premises but from the premises of M/s. Sambhav Processors. If the goods were actually seized from their own premises, there was no need for the department to leave the good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for imposition of penalty. The departmental officers were aware of the manufacture of the subject goods. There has been a bona fide difference of interpretation. Earlier, the officers were themselves taking the view that cropping of knitted fabrics did not constitute manufacture. Later they changed this stand. This would not justify any finding against them leading to the imposition of penalty. He summed up his arguments with the postulations that the process in question is not a dutiable process, that even if it is dutiable, it is covered by the exemption and even if not exempt, the liability is not on them but the actual manufacturers who carry out the subject process. 3. Replying to the arguments of the learned Counsel, Shri L.C. Chakraborty, learned J.D.R. referred to the judgment of the Supreme Court in the Mafatlal Fine Spinning Mfg. Co. Ltd. matter [1989 (40) E.L.T. 218 (SC)] cited by the Counsel. He stated that this decision was rendered in the context of Rule 49A of the Central Excises Rules, to decide whether cropping would make the cotton fabrics liable to interest at 3% of the yarn duty as against interest at 1 applicable for grey (unprocessed) fabrics. He also ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point for decision is whether the process of cropping would constitute a manufacturing activity bringing into existence a new product different from the starting material. The Supreme Court judgment in the Mafatlal matter (supra) is to the effect that cropping does not constitute a process of taking grey cotton fabric to the category of processed cotton fabrics for the purpose of levy of 3% interest on the amount of yarn duty. In other words, cotton fabrics remain grey or unprocessed even after the process of shearing. This decision is dated 17-1-1989 and was not available to the Collector when he adjudicated the case on 4-8-1988. However, the technical definition for the process of shearing referred to in the said judgment taken from Standard Reference books were taken note of by him. He, however, held the view that the said definitions for the process of shearing did not come into the picture while examining the applicability of the exemption notification wherein the term cropping had been specifically defined. It is his contention that the definition in the Notification is narrower in its scope than the definition given in the Reference books. On examining this contention we f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pile; on clear/finish fabrics like gabardine, a very close shearing is given. 7. It was contended by Shri Chakraborty during his arguments supporting the Collector s order that the term cropping in the exemption Notification would cover only cutting away the loose ends from the fabrics. Thus, only fabrics from which loose ends were cut away mechanically would be eligible for the exemption. The loose ends would be only the ends of the threads at the edges and not all over the surface of the fabrics. Since in the present case, the process carried out covered the cutting or trimming of the pile on the surface of the fabrics, it went beyond the scope of the notification and hence duty has been correctly determined. This argument does not appeal to us. The definition of the term cropping in the exemption Notification in question is, no doubt shorter than the one given in the Reference books referred to in the decisions cited by both the parties. But that, to our mind, does not advance the case of the department. Cutting away mechanically of loose ends from the fabrics cannot mean that the cutting should be confined only to the loose ends of yarn at the edges. The loose ends in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mo the seizure could not have been effected from his factory, as only independent persons attest the seizure memo as witnesses. But this has not come out properly in the order. Notwithstanding this, two points raised by the learned Counsel for the appellants tend to support his contention about the place of seizure not being their factory. One is that if the processing had, in fact, been carried out in their factory as alleged by the department, their not being asked to take out a Central Excise licence after the seizure would not be the normal reaction of the department. They would have insisted on a licence being applied for to regulate future clearances and payment of duty. Such a course was not followed. There is no evidence or finding that any machine for cropping was found with them and that it was dismantled and removed after the seizure which would justify the department s non-insistence on their taking a licence. The other point is that the seized goods were left with the Director of Sambhav Processors for safe custody. We find that the seizure memo mentions that the goods after seizure have been kept in one corner of the finishing room of the factory and handed over to Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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