Dyeing of grey cotton fabrics held to be manufacture under amended excise law; wrong rule citation in notice did not vitiate demand.

Amended excise law treated bleaching, mercerising, dyeing, printing and related processing of cotton fabrics as manufacture, and the Tribunal held that dyeing of grey cotton fabrics, including kutcha dyeing, was therefore excisable even if the colour was not fast or the goods were captively consumed. It also held that the absence of sale did not avoid duty because the levy attached to manufacture. A mistaken reference in the show cause notice to rule 10A instead of rule 10 did not invalidate the demand where the notice otherwise disclosed the basis of the levy and the demand was within time.

---

---

Issues: (i) Whether dyeing of grey cotton fabrics, including kutcha dyeing, amounted to manufacture and attracted processing duty under the amended excise law; (ii) Whether the demand was vitiated because the show cause notice mentioned rule 10A instead of rule 10.

Issue (i): Whether dyeing of grey cotton fabrics, including kutcha dyeing, amounted to manufacture and attracted processing duty under the amended excise law.

Analysis: The amended definition of manufacture in Section 2(f) specifically included, in relation to cotton fabrics, bleaching, mercerising, dyeing, printing and other specified processes. The amended tariff entry also created separate treatment for grey fabrics and fabrics subjected to processing. The Tribunal held that these legislative changes applied retrospectively and made it clear that dyeing of grey fabrics was manufacture. No distinction was accepted between kutcha dyeing and pucca dyeing, and the absence of sale or the fact of captive use did not avoid excise liability, since the levy was on manufacture.

Conclusion: The issue was decided against the appellants and in favour of the Revenue.

Issue (ii): Whether the demand was vitiated because the show cause notice mentioned rule 10A instead of rule 10.

Analysis: The notice, read as a whole, disclosed the basis of the demand and the amount sought. A mistaken reference to rule 10A did not invalidate the demand where the authority otherwise had power to proceed under rule 10 and the demand was within time. The calculation objection was not established on the material before the Tribunal.

Conclusion: The issue was decided against the appellants and in favour of the Revenue.

Final Conclusion: The appeal failed because the processing activity was held to be excisable manufacture and the procedural objections to the demand were rejected.

Ratio Decidendi: Where the tariff and the charging provision expressly deem specified processing of grey cotton fabrics to be manufacture, dyeing of such fabrics is taxable even if the colour is not fast or the goods are captively consumed; a mistaken reference to the wrong rule in the notice does not vitiate the demand if the substantive power exists and the demand is otherwise within time.

---