Padding, not coating, determines exemption eligibility for treated cotton fabrics under the notification.

CESTAT, Mumbai held that the treatment applied to cotton bleached fabrics was padding, not coating, for purposes of exemption under Notification No. 5/98-C.E. The Tribunal relied on the physical characteristics of the samples: they did not show a uniform, even coated surface, the interstices were not fully closed, and the fabric was not impervious to water. On that basis, the essential indicia of coating were absent, so the department's reasoning could not justify denial of the notification benefit. The exemption was therefore admissible to the assessee.

---

---

Issues: Whether the process applied to cotton bleached fabrics was padding or coating for the purpose of availing the exemption under Notification No. 5/98-C.E.

Analysis: The dispute turned on the character of the treatment given to the fabrics. The adjudicating authority treated the mixture applied to the fabrics as a coating on the basis of laboratory findings and the preparation of a compound containing starch and other ingredients. The Tribunal found that the samples did not show a uniform and even coated surface, the interstices were not completely closed, and the fabric was not impervious to water. On that basis, the process did not satisfy the essential indicia of coating. The application of the special mixture was held to answer the description of padding rather than coating, and the benefit of the notification could not be denied on the reasoning adopted by the Commissioner.

Conclusion: The process was padding and not coating, so the exemption under the notification was admissible in favour of the assessee.

---