TMI Blog2010 (12) TMI 729X X X X Extracts X X X X X X X X Extracts X X X X ..... d job worker without first reclassifying the goods at the end of the suppliers - in view of the fact that several processes padding, bleaching, dyeing etc in the case of fabrics amount to manufacture, each time a manufacturing process is completed, goods have to be classified afresh. Therefore, the contention of the learned advocate that the department cannot attempt to classify the goods afresh, has no force and has to be rejected Regarding penalty - They failed to declare what was received by them for undertaking processes like padding, calendaring etc was in fact leno/gauze fabrics and this led to availment of ineligible exemption - Held that: the total demand of duty is Rs. 20,51,369/- and penalty imposed is equal to the duty. In this case, penalty under Section 11AC has not been imposed and penalty has been imposed under Rule 173Q of Central Excise Rules, 1944 - Penalty is reduced to the extent of Rs. 5 lakhs - Appeal is disposed of - E/3366-3367/2005 , E/1164-1166/2006 - A/1921-1925/2010-WZB/AHD - Dated:- 16-12-2010 - Ms. Archana Wadhwa, Shri B.S.V. Murthy, JJ. REPRESENTED BY : Shri P.M. Dave, Advocate, for the Assessee. Shri Avinash Thete, SDR, for the Departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the decision of the Commissioner for confirmation of demand in respect of Book-Binding Cloth and Gauze fabrics and also imposition of penalty. Since all the appeals arose from a common order, all of them are taken up together and a common order is being passed. 4. The show cause notice dt. 19-3-02 pertains to liability for confiscation of seized fabrics and penalty in connection with offences relating to seized fabrics. The show cause notice dt. 11-3-03 is for demand of duty on the goods already removed and penalty relating thereto. In the impugned order, both the show cause notices have been decided and we also proceed to pass a common order in respect of the impugned order covering all the issues. 5. There is no dispute regarding classification of the Book-Binding Cloth and its liability to Central Excise duty. Shri Yunusbhai S. Dewdiwala, partner of M/s. Vijay has admitted that M/s. Vijeta was functioning from a part of the factory compound for manufacturing Book-Binding Cloth and was holding Central Excise registration during the period from April 2001 to September 2001. It was surrendered by them for lack of sufficient business. M/s. Vijeta was availing full exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on No. 8/2001-C.E., which provides for exemption to specified goods specifically provides that exemption contained in the notification was not available to specified goods having brand name/trade name, whether registered or not, of another person. Further, the definition of brand name/trade name as provided in the explanation reads as under : brand name or trade name means a brand name or a trade name, whether registered or not, that is to say, a name or mark, such as symbol, monogram, label, signature or invented word or writing which is used in relation to such specified goods for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified goods and some person using such name or mark with or without any indication of the identity of that person. 8. It is settled law that exemption notifications have to be construed strictly. Therefore, it is not necessary to show what brand name/trade name or logo has been affixed, since what is required to be shown is only that the brand name/label/monogram etc affixed on the goods belongs to some one else. In this case, there is no denial that Book-Binding Cloth was affixed with the monogr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that reliance of learned Commissioner on the decision of Hon ble Supreme Court in case of M/s. Susma Textile Pvt. Ltd. is mis-placed. The issue under consideration in that case was classification of the product under Chapter 52 of the Chapter 59 and was not whether the assessee was doing padding or not. He also contended that nowhere in the decision what is padding or otherwise has been dealt with. He also submitted that Sr.No. 116 of the Notification No. 3/2001 which exempts various processes carried out on fabrics falling under Chapter 52.07, 52.08 and 52.09 and process of padding is one of them. The notification provides that padding that is to say, apply starch or fatty material on one or both sides of the fabric. By using several materials in addition to starch, the process carried out by the appellant does not get covered by the definition of padding as given in the notification. Therefore, the appellant does not become eligible for exemption. He also relies on the decision of Hon ble Supreme Court in case of CCE, Chandigarh v. M/s. Mahaan Diaries, 2004 (166) E.L.T. 23 (S.C.) to submit that if benefit is not available on the basis of wordings of the notification, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rics heavily sized and stiff with starch gum and inorganic fillers. The report also stated that on treatment with hot water the fabric looses all its stiffness. The Hon ble Supreme Court came to the conclusion that the process undertaken by the appellant would not amount to coating. Heading 59.01 covered the textile fabrics coated with gum of amylaceous substances of a kind used for the outer cover of book or the like. The Hon ble Supreme Court observed that if the department was to succeed in classifying the products under Heading 59.01, it should have been shown that the fabrics was stiffened textile, stiffness has to be durable and permanent, fabric is heavily sized. While considering whether the department had met these conditions, in Para 11, the Hon ble Supreme Court made observation that the report given by the Chemical Examiner on which the Department has placed reliance itself indicates the process undergone by the respondents fabric is only that of padding and does not show any stiffness of permanent nature. It is also observed that reliance was placed on this observation by Commissioner to conclude in faour of the M/s. Vijay. The test report relating to Interlining Cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed chemicals, compounds and fillers such as white cement, talc, china clay, tinopal etc. and, starch other fatty materials like Maize starch, tapioca starch. Therefore, even though the process undertaken by the appellant could be called padding , even in terms of trade terminology, yet what is to be seen is that whether the process undertaken is covered by the definition given in the notification. Obviously, it is quite clear that it is not. We also find that the decision of Hon ble Supreme Court relied upon by Revenue in the case of M/s. Mahaan Diaries is applicable to the present case. Only if we add words to the notification or stretch the meaning or definition of padding, M/s. Vijay becomes eligible which is not to be done as per the decision of the Hon ble Apex Court. Similarly, the observations of Hon ble Supreme Court in case of M/s. Novopan India Ltd. that exemption is in the nature of exception and therefore has to be construed strictly, would mean that we have to examine the eligibility in terms of the definition given in the notification. The observations of Hon ble Supreme Court in case of Rajasthan Spinning Weaving Mills Ltd. is also applicable since acceptance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had produced a copy of declaration filed by them to claim exemption wherein the exemption was claimed on the ground that they were undertaking processes specified in the Notification viz. padding, stentering, calendaring etc. There is nothing to show that the appellants were asked to show that whether the padding undertaken by them was as per the definition in the notification or not. 16. In view of the above, we find that the demand beyond the normal period cannot be sustained and since the issue is one of interpretation, no penalty could have been imposed on M/s. Vijay. This issue is required to be remanded to the Commissioner for the sole purpose of verification as to whether any portion of the demand is within time limit and if so, quantify the demand. Penalty imposed as already mentioned is set aside. 17. For the same reason, the seizure of fabrics and confiscation is also not warranted and therefore the contention of the Revenue that the goods should be confiscated, penalty should be imposed as regards seized fabrics also cannot be upheld. 18. The next issue pertains to duty liability of Mosquito Net fabrics. The case of the department is that the fabrics satisfy the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not applicable to the present case. 22. As regards reliance of the appellant on the orders of the two commissioners, it has to be stated that the issue of classification of fabrics viz. Mosquito Net fabrics had been considered by this Tribunal in the case of CCE, Ahmedabad v. M/s. Neptune Textile Mills Ltd., 2009 (242) E.L.T. 426 (Tri-Ahmd). In that case, it was held that Mosquito Net Fabrics was leno gauze fabric only. 23. In this case, the sample of Mosquito Net fabrics was sent for testing 3 times. The samples were tested and the results of the test report as given in Para 3 are reproduced below : Leno Fabric : The sample is in the form of coloured woven fabric made wholly of cotton. It has the characteristics weave of Gauge Fabrics as described in Chapter Note 3 of Chapter 58 of CET. Remnant Samples : CLR/SKI-8/24, dt. 15-5-02 (c -M/s. Vijay Textiles, Ahmedabad) The sample is greenish yellow coloured somewhat stiffened open structure woven fabrics, stiffened by treatment with gum, starchy matter and inorganic mineral matter. The interstices between the yarns are not close. The fabric portion is made from two-ply spun yarns wholly composed of cotton. The nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of gauze vary greatly in appearance, and the designs produced during the weaving process are also very varied, and they should not be confused with the broche or other fabrics of Chapter 50 to 55, hand or machine made lace, embroidery, tulle or other net fabrics of this Chapter. 25. The issues relevant are the type of weave, type of fibre and not the end use for classification purpose. This was the conclusion reached by the Tribunal in case of M/s. Neptune Textile Mills Ltd., 2009 (242) E.L.T. 426 (Tri.-Ahmd.) and this is the conclusion that emerges after consideration of explanatory note reproduced above. What is important is the pattern of weaving of Mosquito Net fabrics/leno fabrics. In fact, this issue was considered in detail by the Tribunal also and the relevant paragraphs are reproduced below (except the diagaram). 3.1 We have considered the submissions from both the sides. According to Chapter Note 3 of Chapter 58, for purpose of heading 5803, gauze means a fabric with a warp composed wholly or in part of standing or ground threads and crossing or doup threads which cross the standing or ground threads making a half turn, a complete turn or more to form loops throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d which was different compared to that of mosquito net fabrics. This is coupled with the note below 5803 which says gauze (sometimes known as leno weave) is defined in Note 3 to this Chapter . This clearly shows that gauze manufactured by using leno weave process is classifiable under 5803 only. What comes under Chapter 52 to 55 is plain loosely woven fabrics and plain weave and not leno weave fabrics under consideration here. While the Chemical Examiner s opinion and the notes under different chapters are highly complicated and very technical in nature and from the discussions above what comes out is that the product manufactured by the respondents was leno gauze fabrics woven as per leno weave method and as per the Note 3 of chapter notes to Chapter 58 and the Note below Chapter 5803, the same is classifiable under 5803 only. The ld. Advocate on behalf of the respondents pointed out that the Note below Chapter 5803 providing that the heading does not apply to plain loosely woven fabrics of plain weave such as thus generally used for bandages and dressings often called gauze are classifiable under Chapter 52 to 55 was not considered by the Tribunal in M/s. Mangala Textiles case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also we find none of the challans related to the period in dispute. Therefore, all these challans have to be ignored. As regards delivery challans relating to the period 1998-2001, we did not have a benefit of having a look at them since the same were not produced. However, the Commissioner has made a categorical observation that he has seen the delivery challans relating to the period and during the relevant period, no classification of the fabrics being supplied, was mentioned. Under these circumstances, it cannot be said that the department attempted to reclassify the goods in the hands of the receiver in this case. In any case, in view of the fact that several processes padding, bleaching, dyeing etc in the case of fabrics amount to manufacture, each time a manufacturing process is completed, goods have to be classified afresh. Therefore, the contention of the learned advocate that the department cannot attempt to classify the goods afresh, has no force and has to be rejected. 30. Learned Advocate also contended that imposition of penalty of Rs. 20 lakhs and Rs. 50,000/- on M/s. Vijay under Rule 173Q is arbitrary and high handed. He also submitted that it was disproportionat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and matter remanded to Commissioner for fresh decision as regards penalty on the partners. 33. To sum up, (a) Duty demand of Rs. 1,54,870/- with interest from M/s. Vijeta is upheld and penalty on M/s. Vijeta under Section 11AC is also upheld. (b) Appropriation of Rs. 50,000/- as fine in lieu of confiscation and penalty of Rs. 50,000/- on M/s. Vijay on account of duty evaded on Book-Binding Cloth seized in the premises of M/s. Vijay is modified by reducing both to Rs. 20,000/- each (Rupees Twenty Thousands only). (c) Duty demand on Gauze fabric amounting to Rs. 20,51,369/- is upheld and penalty on M/s. Vijay is reduced to Rs. 5 lakhs (Rupees Five lakhs only). (d) The appellants are held to be not eligible for exemption in respect of Interlining fabrics for the processing of padding undertaken by them on merit. Seizure of Interlining Cloth is vacated in view of the fact that the matter is one of interpretation. (e) The issue is remanded to Commissioner for re-quantification of duty payable within the normal period of limitation, if any. (f) The order of the learned Commissioner on two partners viz. Shri Yunusbhai S. Dewdiwala and Shri Shabirbhai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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