Cotton fabrics exemption sustained where power-free processing continued and duty demands exceeded the notice's scope.

Cotton fabrics processed without the aid of power remained within the exemption, and calendering with plain rollers did not displace that benefit where the other processing was done without power. Duty under the amended notification also failed because the record did not establish that keiring operations were continuing after the asserted cessation. The demand relating to Navneet Manufacturing Company could not be sustained since that unit was not specifically covered by the notice, and penalty fell once the substantive duty demands failed. The exemption remained available and the consequential demands and penalty were unsustainable.

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Issues: (i) Whether cotton fabrics processed without the aid of power remained entitled to exemption notwithstanding calendering with the aid of power and the department's plea that the units formed one factory; (ii) whether duty could be demanded under the amended notification on the footing that keiring operations were continuing in the premises; (iii) whether duty could be levied on clearances from Navneet Manufacturing Company when that unit was not included in the specific charge in the notice; and (iv) whether penalty was exigible.

Issue (i): Whether cotton fabrics processed without the aid of power remained entitled to exemption notwithstanding calendering with the aid of power and the department's plea that the units formed one factory.

Analysis: The exemption notifications covered cotton fabrics processed without the aid of power or steam. Even assuming that the several units constituted one factory, the processes other than calendering were carried out without power and remained within the exemption. Calendering with plain rollers was treated as not amounting to manufacture and, on the facts, did not displace the benefit otherwise available to the processes done without power.

Conclusion: The exemption could not be denied on this ground and the demand based on calendering failed.

Issue (ii): Whether duty could be demanded under the amended notification on the footing that keiring operations were continuing in the premises.

Analysis: The record contained an earlier statement that keiring operations had been stopped, the keirs dismantled, and the unit had switched over to cold bleaching. The show cause notice and the adjudication order did not supply material rebutting that statement or establishing that keiring operations were in fact being carried on in the relevant units after the stated cessation.

Conclusion: The demand under the amended notification was not sustainable.

Issue (iii): Whether duty could be levied on clearances from Navneet Manufacturing Company when that unit was not included in the specific charge in the notice.

Analysis: The notice referred to several units but did not specifically include Navneet Manufacturing Company in the charge that the units formed part of the appellant's establishment. In the absence of an express proposal in the notice, the adjudication could not validly travel beyond its scope to treat that unit's clearances as belonging to the appellant.

Conclusion: The duty demand relating to Navneet Manufacturing Company could not be upheld.

Issue (iv): Whether penalty was exigible.

Analysis: Once the duty demand itself failed on the substantive issues, the foundation for penalty also disappeared.

Conclusion: Penalty was not imposable.

Final Conclusion: The exemption remained available, the duty demands were unsustainable, and the penalty could not stand.

Ratio Decidendi: Where the processes attracting duty are not shown to fall outside the exemption, where the factual basis for invoking an amended exclusion is unproved, and where a demand travels beyond the specific charge in the notice, the demand and consequential penalty cannot be sustained.

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