TMI Blog2003 (12) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... acturing units for the purpose of denial of the benefit of exemption under certain Central Excise notifications. The groups units are enumerated below : I 1. M/s. Arvind Processors 2. M/s. Raj Processors 3. M/s. Mangalmurti Processors II 1. M/s. Swadeshi Dyeing and Bleaching 2. M/s. Silver Processors III 1. M/s. National Dyeing and Bleaching 2. M/s. Gopal Processors 3. M/s. Deep Processors 4. M/s. Sudarshan Processors 5. M/s. Harish Processors IV 1. M/s. Yeshwant Co-operative Processors 2. M/s. Ichalkaranji Processors V 1. M/s. Laxmi Co-operative Processors 2. M/s. Vishnu Laxmi Processors VI 1. M/s. Deccan Processors 2. M/s. Ganesh Processors VII 1. M/s. Shri Viankaesha Processors 2. M/s. Shri Saraswati Processors VIII 1. M/s. Rahul Processors IX 1. M/s. Swastik Dyeing and Bleaching 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the same factory in which they have been subjected to any process other than the processes specified in the said Table". For the period prior to 8-11-1982, similar exemption and proviso was contained in Notification No. 80/76-C.E., dated 16-3-1976 as amended vide Notification No. 292/79-C.E., dated 24-11-1979. 5. Shri Datta Calendering (SDC) was set up in 1975 and was engaged in the process of calendering of Cotton Fabrics with the aid of power, but without grooved rollers and was also availing the exemption under Notification No. 253/82-C.E. 6. M/s. Shree Ram Processors (SRP) was set up on 14-5-1976 as a Proprietary concern and was converted into Partnership firm on 8-4-1978. SRP was engaged in the following activities viz: (i) Bleaching of Grey Cotton Fabrics by hand; and (ii) Mercerising by Hand-operated machines. SRP was paying the duty under the Compounded Levy Scheme till 1979 and was holding separate Central Excise L-4 Licence. Thereafter, SRP was availing total exemption under Notification No. 130/82-C.E., dated 20-4-1982 which granted total exemption to Cotton Fabrics processed without aid of power or steam. 7. Between 5-9-1985 and 7-9-19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , who is actually on the payrole of M/s. SDBF without getting remuneration from M/s. SRP, M/s. SDC. (ix) Shri Ramchandra Shankar Moghe, Partner of M/s. SDBF, is a key person in all the three units and supervise all the technical operations in M/s. SRT, M/s. SDC and but gets profit share only from M/s. SDBF. He was also partner in M/s. SRP upto 9-4-1985 as a representative of trustee of M/s. Shri Hari Textile Trust. (x) It was also observed that M/s. SDBF and M/s. SRP have different water connections but M/s. SRF had dead water connection and it is seen that M/s. SRP is getting water by tanker and water from SDBF also, for which water charges are borne by M/s. SDBF. (xi) It was also observed that M/s. SDBF is having two power meter connections. Out of which one power meter is supplying electricity to M/s. SDC and charges are borne by M/s. SDBF and also steam is supplied for calendering to M/s. SDC by M/s. SDBF for which charges are borne by M/s. SDBF. (xii) M/s. SDBF has owned one telephone which is commonly used by M/s. SDC and M/s. SRT. But telephone charges are paid by M/s. SDBF only. Also telephone in the name of Shri R.S. Moghe, Partner of M/s. SDBF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There is common maintenance staff for M/s. SDBF, M/s. SDC and M/s. SRT. But they are paid by M/s. SDBF. (xxiv) It can be seen from the partnership deed that Shri Ramchandra Shankar Moghe partner of M/s. SDBF's wife Mrs. Ujwala Ramchandra Moghe is partner of M/s. SDC. Similarly Shri T.L. Vyas partner of M/s. SDBF's wife is partner of M/s. SDC Mrs. Premlata Tulsiram Vyas. Similarly Shri R.S. Moghe and Shri V.S. Moghe are brothers who are partners in M/s. SDBF. Shri V.S. Moghe partner of M/s. SDBF's son Shri Arvind Vasudeo Moghe is partner of M/s. SDC. Also son of Shri S.L. Vyas partner of M/s. SDBF, Shri R.V. Vyas is partner of M/s. SDC. So also Mrs. Manjushri Moghe partner of M/s. SRP is related to Shri R.S. Moghe and Shri V.S. Moghe partner of M/s. SDBF. (xxv) M/s. SRT Jaisingpur non-power operated unit is receiving grey fabrics from the merchants with the instructions that the fabrics supplied by them etc., to be bleached and mercerised. There are no specific instructions to transfer bleached and mercerised fabrics to M/s. Swastik Dyeing Bleaching Factory for stentering, folding, bailing, stamping and to M/s. SDC for calendering, however, hand bleached and mercerised fabr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d fabrics is invariably sent to M/s. SDBF and M/s. SDC to carry out finishing operations. There is no agreement between non-power operated unit and power operated unit to conduct the business in the manner explained above. 11. The notice alleged that : (a) In terms of Notification No. 80/76-C.E. and 122/76-C.E. both dated, 16-3-1976 as amended by the Notification No. 253/82, dated 8-11-1982 and by Notification No. 54/85, dated 17-3-1985 fabrics subjected to the processes of bleaching and mercerising without the aid of power when subjected to the processes of stentering, calendering, bailing etc., with the aid of power at the same unit are not entitled to exemption. (b) Partners of M/s. SDBF had/have therefore created apparently independent entities viz. M/s. SRP and M/s. SDC to wrongly avail to the benefit of the said notification. (c) M/s. SDBF, M/s. SDC and M/s. SRP have colluded with one another to fragment what is essentially one unit into three units to avail the benefit of Notification No. 130/82-C.E. and 253/82-C.E. and have suppressed the true relationship deliberately which they were supposed to declare to the department; (d) The bleac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to Notification No. 80/76-C.E. for the first time. Therefore, major premise of wilful suppression on account of deliberate fragmentation of units is incorrect. Prior to 24-11-1979, even if all the units are treated as one factory, all the activities would have been exempt. Bleaching/Dyeing etc. would be exempt as done without aid of power under Notification No. 137/77-C.E. and calendering under Notification No. 80/76-C.E. unconditionally. Hence, alleged fragmentation done much prior to 24-11-1979 cannot be to evade duty. Real cause of dispute in the present case is the proviso to Notification No. 80/76-C.E. added by Notification No. 292/79-C.E. This cannot be covered by proviso to Section 11A. (b) The legislative history surrounding the amendments made on 24-11-1979 will show that intentional evasion of duty cannot be attributed to the Assessees/Respondents. On 14-5-1979, the Central Excise Salt and Additional Duties of Excise (Amendment) Bill, 1979 was introduced in Parliament proposing the insertion of sub-clause (v) in Section 2(f) of the Act so as to include bleaching, mercerising, dyeing, printing etc. within the meaning of the term "manufacture" under Section 2( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses like bleaching, dyeing or printing carried on with aid of power or steam accompanied with dutiable finishing processes like Calendering, Stentering, Singeing, Scouring etc. as dutiable processes would be completely exempt under Notification No. 293/79-C.E., dated 24-11-1979 and finishing processes would be exempt under Notification No. 80/76-C.E. as amended. The obvious objective was to avoid a situation where duty would become payable at every stage (on account of the retrospective amendment to Section 2(f) supra) and collect it at the final stage. Also, at the same time, it was to be ensured that duty on account of dutiable processes do not escape payment at any stage. The legislative intention is that duty on dutiable processes like bleaching, dyeing etc. done with the aid of power would be paid by the processor i.e. integrated/composite mill at the final stage, i.e. calendering. This alone was the object sought to be achieved by adding the above proviso to Notification No. 80/76-C.E. by Notification No. 292/79-C.E., dated 24-11-1979. Notification No. 80/76-C.E. as amended by Notification No. 292/79-C.E. continued to be in operation till 4-11-1982, on which date, it was supe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of other artificial plastic materials." However, Section 2(f) of the Act was amended vide Act (No. 6 of 1980), dated 12-2-1980 whereby sub-clause (v) was inserted in the Section retrospectively w.e.f. 24-11-1979. The relevant part of amended Section 2(f) read as under : "S.2(f) - "Manufacture" includes any process incidental or ancillary to the completion of a manufactured product; and …… …… (v) in relation to goods comprised in Item No. 19-I of the First Schedule, includes bleaching, mercerising, dyeing, printing, waterproofing, rubberizing, shrink-proofing, organdie processing or any other process or any one or more of these processes;" Simultaneously, Tariff Item No. 19I(b) also stood amended as under, vide Act 6 of 1980 w.e.f. 12-2-1980 :- "19. Cotton Fabrics - I. 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 and (iii) fabrics covered partially or fully with textile flocks or with preparations containing textile flocks - (a) cotton fabrics, not subjected to any process. (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by a pair of endless travelling chains maintaining welf tension. Note 1: Attachment may be by pins (pin stenter) or clips (clip stenter). Note 2 : Such machines are used for : (a) drying, (b) heat-setting of thermoplastic material; (c) fixation of chemical finishes." Since the goods involved are "Cotton Fabrics", the question of heat setting of thermoplastic material through stentering does not arise being relevant only in case of man-made fabrics. It is not the case in the SCN that SDBF undertake stentering for fixation of chemical finishes. It is therefore evident that the "Stentering" was undertaken only for drying. Therefore, the ratio laid down by the Hon'ble Supreme Court in the Siddeshwari Cotton Mills' case (supra) with regard to "calendering" equally apply to the process of "stentering" carried on by the Respondents on Cotton Fabrics and the same would also not amount to "manufacture" as envisaged under Section 2(f) of the Act. (d) Squeezing of excess water from the fabrics also does not amount to 'manufacture' in view of the principle laid down by the Larger Bench decision in Adreena Industries v. CCE, Chandigarh, 1987 (28) E.L.T. 364 (T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... processes involved are so interdependent and interconnected that but for each being carried out, the final product would not emerge. Also, if the Revenue's interpretation is accepted, then the Notification under reference viz. 253/82-C.E. will never apply, for the reason that the exemption conferred by Notification No. 253/82-C.E. is applicable only if bleaching, dyeing or printing is carried on in one premises (factory) and the calendering in another premises (factory). If according to the department bleaching/dyeing/calendering are one integrated process and different premises where these activities are undertaken will therefore render these premises one factory, then no one will be able to comply with the proviso to Notification No. 253/82-C.E. and Notification will be rendered nugatory. All the units under reference are separate factories and are not the precincts nor the part of the same premises. (b) The various factors such as common management common administration, common sharing of water, job work transactions amongst them, close relationship amongst the partners etc. including the so-called operational unity relied upon by the Collector are entirely irrelevant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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