TMI Blog1984 (3) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Excise Rules, 1944 (hereinafter referred to as the Rules) inasmuch as they were alleged to have manufactured and removed a quantity of 6,09,848.47 sq. metres of calendered cotton fabrics falling under Item No. 19-I(b) of the 1st Schedule to the Central Excises and Salt Act (hereinafter referred to as the CET) during the period from 14-5-1981 to 19-9-1981 without obtaining a Central Excise licence, without maintaining any statutory records, without submission of price list/classification list, without observing any Central Excise formalities and without payment of Central Excise duty leviable thereon, amounting to ₹ 2,62,767.04. (i) The allegations against M/s. Jatia Cotton Mills Ltd. (hereinafter referred to as Jatia Mills) were that they had contravened Rules 9 (1), 173-B, 173-C, 173-F and 173-G of the Rules inasmuch as they had manufactured and cleared a quantity of 3,40,136.40 sq. metres of cotton fabrics falling under Item No. 19-1 (b) of the CET during the period from 12-5-1981 to 19-9-1981 without payment of duty by availing of exemption under Central Excise Notification Nos. 230/77 and 231/77 both dated 15-7-1977, although they were not entitled to such exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not a grooved calendering machine, the calendered fabrics produced by the appellants were eligible for exemption in terms of the Notification. (iii) The powerloom fabrics which were subjected to calendering by the appellants were exempted from duty in terms of C.E. Notification Nos. 230/77 and 231/77. These Notifications applied to powerloom units which did not have processing plant. The crux of the dispute was whether the type of calendering which the appellants were doing was processing or not. According to the Collector it was and according to the appellants it was not. (iv) Apart from calendering no other process was undertaken by the appellants. (v) On the question whether calendering amounts to a process , the following points were put forth :- (a) Board s 2 circular letters No. 13 and 14/Fabrics/62-CX-VII dated 4-7-1962 and 11-7-1962 showed that the Board did not consider calendering as a process for the purpose of assessment of cotton fabrics to duty. (b) Though the Tariff Item No. 19 and Section 2(f) of the Central Excises and Salt Act were amended in 1979 and as a result of the amendment, the pre-existing situation was altered to one in which a distin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed or produced in India ; and calendering is not a process of manufacture. The Tribunal should, therefore, ignore any interpretation of the tariff entry which is inconsistent with the provisions in the Constitution. In support of the proposition that the interpretation consistent with the Constitution should be preferred to one not so consistent, certain decisions were cited. In support of the proposition that there was no manufacture involved in calendering the decisions reported in 1980 E.L.T. 343 and 1979 E.L.T. 593 were cited. (g) The Department had not adduced any evidence to show that what the appellants made and cleared was processed cloth. Even after calendering the fabric was sold as grey fabric. (h) Because of the stand of the Department, the appellants were discriminated against in the matter of levy of duty and this violated Article 14 of the Constitution. (i) In another appeal of Siddeshwari Mills disposed of by the Tribunal by its Order No. 516/83-D, the demand raised against the appellant was quashed on the ground that there was no clandestine removal and, therefore, Rule 9(2) was not applicable. The same is the position in the present case. Since there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 566 was cited in this connection. Also cited was the decision of the Kerala High Court reported in 1978 of the E.L.T. J 520 wherein the High Court held with reference to Item No. 22D of the CET that even the process of ironing was a process of manufacture although in that case there was no specific definition in Section 2(f) in relation to that tariff item. (vi) The question of intention of the Government, leading to the issue of notifications, etc. again was not relevant. The decision in 1978 E.L.T. J 350 was cited. (vii) The present appeal had to be considered with reference to Notification Nos. 230/77 and 231/77 which exempted powerloom fabrics from excise duty only if no processing is done in the powerloom unit. Notification No. 80/76 which was with reference to independent processing units had no application to the present cases. The mere existence of the calendering plant in the powerloom unit would rule out the applicability of Notifications 230/77 and 231/77 whether or not the calendering plant was in fact used. (viii) The contention with reference to the applicability of Rule 9(2)/Section 11-A was not agitated before the lower authorities. At any rate, the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Science Technology has this to say :- Calender (Paper, Textiles, etc.) A machine, generally consisting of a number of vertical rollers (or bowls), heated or unheated, through which material is passed under pressure, to impart the desired finish (dull, glazed, etc.) or to ensure uniform thickness . Encyclopaedia Britannica has the following to say :- Calendering is a final process in which heat and pressure are applied to a fabric by passing it between heated rollers, imparting a flat, glossy, smooth surface. Lustre increases when the degree of heat and pressure is increased. Calendering is applied to fabrics in which a smooth, flat surface is desirable, such as most cottons, many linens and silks, and various man-made fabrics. In such fabrics as valveteen, flat surface is not desirable and the cloth is steamed while in tension, without pressing. When applied to wool, the process is called pressing and employs heavy heated metal plate to steam and press the fabrics. Calendering is not usually a permanent process. The following is an extract from Textile Terms and Definitions edited by Carolyna A. Farnfield and P.J. Alvey (Published by Manchester Textile Instit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mulgated which was ultimately replaced by a Bill which was passed into an Act. The statement of Objects and Reasons attached to the Bill says that the Gujarat High Court judgment would have the effect of disturbing the balance evolved between the different sectors of the textile industry and the legislation was with the object of overcoming the difficulty which had arisen as a result of the said judgment. Section 2(f) of the Central Excises and Salt Act as also the Tariff Item No. 19 were amended by the aforesaid legislation so as to bring processing within the definition of manufacture in relation to cotton fabrics and to expressly provide for the levy of duty on processed fabrics distinctly and differently from unprocessed fabrics. Therefore, it is no longer open for anyone to argue that processing does not amount of manufacture within the meaning of Section 2(f) or that processed fabrics are not chargeable to duty under Item 19 CET. It is useful at this stage to note that the Bombay High Court before whom the vires and validity of the aforesaid amendments were challenged, upheld the vires and validity of the amendment in its judgment in the case of New Shakti Dyeing Work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the intention of the Act is otherwise clear. The phrase literally means of the same kind or species . If a general word is added to specific words, the general word would take its colour from the specific words. In M.K. Ranganathan and Another v. Government of Madras and Others - 2 SCR 1955, 374, the Supreme Court held that it is a legitimate rule of construction to construe words in an Act of Parliament with reference to words found in immediate connection with them. It is also a well recognised rule of construction that the legislature does not intend to make a substantial alteration in the law beyond what it explicitly declares either in express words or by clear implication and that the general words of the Act are not to be so construed as to alter the previous policy of the law, unless no sense or meaning can be applied to those words consistently with the intention of preserving the existing policy untouched. Citing a few Supreme Court decisions, the book Principles of Statutory Interpretation by G.P. Singh, C.J., says at page 333 that the rule of Ejusdem Generis has to be applied with care and caution. It is not an inviolable rule of law, but it is only permissible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mple produced by the appellants before us it was seen that the appellants had stamped cotton sarees as calendered. It was stated before us that the sarees were sold as calendered sarees. Calendering will thus fall within the ambit of the expression any other process occurring in Section 2(f) and Item 19-I CET, particularly when sub-item (b) of Item 19-I is read in juxtaposition with sub-item (a) which covers cotton fabrics not subjected to any process. 15. The question whether calendering is a process of manufacture or calendered fabrics fall within the mischief of Item 19-I CET is no longer open to question because of the amendments brought about in Section 2(f) and Item No. 19-I CET. 16. Shri Rangaswamy has cited the Supreme Court decision in the Deputy Commissioner of Sales Tax, Ernakulam v. Pio Food Packers - 1980 E.L.T. 343 (S.C.) - in support of his contention that the process of calendering does not amount to manufacture . It was held in this case that although the nature and extent of processing may vary from one case to another, yet it is only when the change, or a series of changes take the commodity to a point where commercially it is recognised as a new and dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic is subjected to any process or not. For another, we find from page 91 of the book Textile Terms and Definitions by the Textile Institute, Manchester, that grey goods mean woven or knitted fabrics as they leave the loom or knitting machine, i.e. before any bleaching, dyeing or finishing treatment has been given to them . The goods under consideration are not grey goods in this sense of the term; they were subjected to the finishing process of calendering. 19. We have now to consider whether the appellants were entitled at the material time to the exemption contained in Notifications Nos. 230 and 231 both dated 15-7-1977. Both these notifications are similarly worded except that the first one confers exemption from basic excise duty and the second one from the additional duty of excise. These notifications exempt unprocessed cotton fabrics falling under sub-item (1) of Item No. 19 CET, manufactured in factories commonly known as powerlooms (without spinning or processing plants) subject to the specified conditions and exceptions. The appellants admittedly were manufacturers of unprocessed cotton fabrics by employing powerlooms. The question is whether they could be said to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itution. We need only say that this Tribunal is not the forum before which this contention can be pressed. 23. We have now to deal with the appellants contention that the demands raised against the appellants deserve to be quashed on the ground that Central Excise Rule 9(2) had no application to the present cases since there was no clandestine removal of goods. In this connection, the decisions in 1978 E.L.T. 399 and 1983 E.L.T. 533, and the Tribunal s Order No. 396/83-D were cited and relied upon. The Senior Departmental Representative, on his part, contended that the applicability of Rule 9(2) was not agitated before the lower authorities and that the Tribunal had held in 1983 ECR 504-D (CEGAT) that for Rule 9(2) to come into play it was not essential that there should be clandestine removals. In 1978 E.L.T. J-399 (N.B. Sanjana v. Elphlistone Spinning Weaving Mills Co. Ltd., the Supreme Court held that to attract sub-rule (2) of Rule 9, the goods should have been removed in contravention of sub-rule (1), i.e. clandestinely without assessment. If the goods have been removed with prior permission of the Excise authorities, Rule 9(2) will not apply. In that case, the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nasmuch as they, like Siddeshwari Mills, manufactured and cleared excisable goods without following the provisions of Central Excise law including Rule 9(1). Hence, in their case, too, Rule 9(2) had been correctly invoked. 26. Shri Rangaswamy has drawn our attention to Order No. 396-D/83 in Appeal No. ED(SB) (T) 292 of 1982 -D in another appeal filed by Siddeshwari Mills. In that order the Tribunal had held, after taking into consideration the facts and circumstances and the Board s Order-in-Appeal dated 28-4-1982 (which is the impugned order before us) that there being no contumacious conduct attributable to the appellants as contemplated under proviso to Section 11A of the Central Excise and Salt Act, only the normal, period of six months for issuing show cause notice was available for the purpose of recovery of the duty which escaped assessment and duty. In the case of Siddeshwari Mills now before us, the show cause notice was dated 12-11-1981 and the period covered was 14-5-1981 to 19-9-1981. Similarly, in the case of Jatia Mills, the show cause notice was dated 10-11-1981, the period covered being 12-5-1981 to 19-9-1981. In both the cases, therefore, the demands are well wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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