Prima facie identity of processed cotton fabrics supported waiver of pre-deposit and stay of recovery.

Rule 96D of the Central Excise Rules, 1944 allowed removal of processed cotton fabrics without duty where the prescribed movement procedure was followed. The record indicated compliance with sub-rule (3), and the demand was based on the view that coating or lamination had changed the processed fabrics into a distinct commodity. The Tribunal found, prima facie, that the fabrics retained their identity at the processor's end and that the coating activity was undertaken by the principal. On that basis, it held that a strong prima facie case was made out and granted waiver of pre-deposit of duty, interest and penalty, with recovery stayed pending the appeal.

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Issues: Whether the appellant had made out a prima facie case for waiver of pre-deposit and stay of recovery in proceedings concerning duty demand under Rule 96D of the Central Excise Rules, 1944.

Analysis: Rule 96D permitted removal of processed cotton fabrics without payment of duty in accordance with the procedure prescribed for movement of goods to another factory or processing factory. The record indicated that the appellant had followed the prescribed procedure under sub-rule (3). The demand rested on the view that the processed fabrics ceased to retain their identity as cotton fabrics and became a new distinct commodity after coating or lamination. The Tribunal found, prima facie, that there was no change in the identity of the processed fabrics at the processor's end and that the coating process was undertaken by the principal. On that basis, the appellant demonstrated a strong prima facie case.

Conclusion: The Tribunal granted waiver of pre-deposit of duty, interest and penalty and stayed recovery pending disposal of the appeal.

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