TMI Blog1982 (11) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... th and thereafter processing the same through flocking chamber where flocksare attached to the sticky based cloth by electrostatic force of over one lakh volt. The fabric is then subjected to certain other processes and the entire process from beginning to the end is an integreted continuous process. There was a controversy between the petitioner and the Central excise authorities with regard to the question as to whether duty payable by the petitioner on the flocked material produced by the petitioner was to be computed under Item No. 19-III of the Central Excise Tariff or under Item No. 19-I or under Item No. 68 thereof. Whereas the contention of the petitioner was that the said material was dutiable under Item No. 19-I or Item No. 68 of the Tariff Manual; the department claimed that the duty in respect thereof was to be levied under Item No. 19-III of the Central Excise Tariff. Items No. 19-I and 19-III of the Tariff run thus :- Rate of duty "Item No. Description of goods Basic duty Additional duty Hand-loom cess (1) (2) (3) (4) (5) 19-I Cotton fabrics other than (i) embroi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustry of manufacturing flocked material made certain representations to the Government of India with regard to the item under which the product manufactured by them was to be dutiable. Accordingly a meeting of the Collectors of Central Excise was convened by Government of India on 1st December, 1978 and it was resolved that flocked fabric was liable to excise duty under item No. 19-I of the Central Excise Tariff and not under item No. 19-III. The Central Government by trade notices No. 7/79, dated 12th January, 1979 (Chandigarh Collectorate) parallel to Calcutta No. 7/79, dated 15th January, 1979, Cochin No. 18/79, dated 23rd January, 1979 and Kanpur Collectorate trade notice No. 17/79, dated 25th January, 1979, made it clear that the flocked fabric is liable to duty under item No. 19-I of the tariff. The respondents have filed a copy of the deliberations made at the tariff conference held in the year 1978 as Annexure C.A. 1 to the counter affidavit sworn by Saheb Singh, Assistant Collector, Central Excise, Division I, Kanpur which indicates that the respondents accepted the position that while manufacturing flocked material the resin treatment to the base fabric has a limited she ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily realise duty from the petitioner under tariff item No. 19-III. Moreover, on merits also the petitioner contended that it had been recognised that as a result of the trade conference the Government of India had accepted the position that merely by subjecting the fabric to resin treatment no marketable commodity came into existence. Coating of the plastic material on the concerned fabric was merely incidental to the subsequent flocking. In these circumstances the Government of India was, vide its order dated 23rd January, 1978, not justified in directing that the petitioner would be liable to pay duty on the goods manufactured by it under tariff item No. 19-III after excluding from the value of the goods finally produced the cost of flocking operation, if the same was separately identifiable, and that the said order deserves to be quashed. The petitioner further contended that once the Assistant Collector, Central Excise had, vide his order dated 9th May, 1979, classified the petitioners goods for purposes of payment of excise duty as falling under item No. 19-I, he had no power to review the same and, on 3rd November, 1979 supersede that order and direct that the petitioner's go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artificial plastic material, the dutiable product came into existence which was a commodity covered by tariff item No. 19-III. The value of such an article for the purposes of excise duty, could be worked out by deducting from the entire cost of production the cost involved in the flocking operation if the same could be separately identified. However, as is evident from the extract of the decision taken by the trade conference which appears to have been accepted by the Central Government (Annexure C.A. 1 to the counter-affidavit of Sri Saheb Singh) the fabric when it is coated with an acrylic emulsion for purposes of sticking flocks thereto is not marketable per se and that the coating process is incidental to the subsequent flocking. Excise duty is payable only on manufacture of goods which are per se marketable. So long as such marketable goods have not come into existence, no question of paying excise in respect thereof can possibly arise. In this view of the matter the order of the Central Government requiring payment of excise duty on the value of the fabric coated by the petitioner with acrylic emulsions with a view to subject the same to flocking operation cannot possibly b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for treating the petitioner's case on a different footing. We have already held that the order of the Government of India dated 23rd January, 1978 cannot now be sustained and the very basis of the order passed by the Assistant Collector, Central Excise on 3rd November, 1979 disappears. In the circumstances it is not possible to sustain the order as well. 11. In this view of the matter, it is not necessary for us to advert to the argument raised on behalf of the petitioner that the order dated 3rd November, 1979 passed by the Assistant Collector, Central Excise was vitiated inasmuch as it purported to review an earlier quasi judicial order which it was not competent to do. 12. In the result, the petitioner succeeds and is allowed with costs. The order dated 23rd January, 1978 passed by the Central Government (Annexure I to the writ petition) and that dated 3rd November, 1979 passed by the Assistant Collector, Central Excise (Annexure V to the writ petition) are quashed. The classification, for purposes of payment of excise duty, made by the Assistant Collector, Central Excise vide his order dated 9th May. 1979 (Annexure IV to the writ petition) is sustained. The respondents are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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