2000 (2) TMI 161 - AT - Central Excise

Appeal success: Challenge on duty demand and penalties under CE Rules and Act upheld

The appeal challenged an order confirming duty demand under CE Rules and CE Act, along with penalties. The appellants argued that their process did not ... Process of manufacture - ancillary to the process of manufacture - hydro-extraction / drying by use of power - benefit of exemption under Notification No. 253/82 - Rule 2(f) definition of manufacture - denial of exemption on account of post-printing squeezing/dryingProcess of manufacture - hydro-extraction / drying by use of power - benefit of exemption under Notification No. 253/82 - Rule 2(f) definition of manufacture - Hydro-extraction or squeezing/drying of printed cotton fabrics by power-operated machines does not constitute a process of manufacture and does not disentitle the assessee from the benefit of the exemption Notification No. 253/82. - HELD THAT: - The undisputed factual position is that after printing the cotton fabrics the appellants squeezed out water by a padding mangle/hydro-extraction machine operated by power prior to drying. The Tribunal examined whether that operation amounts to a process of manufacture within the meaning of Rule 2(f) and would therefore deny the exemption under the Notification. The Tribunal found itself bound by earlier Larger Bench decisions (Adreena Industries and National Dyers) which analysed the same Notification and identical processes and held that hydro-extraction or drying carried out with the aid of power does not constitute a manufacturing process nor is it ancillary thereto. Applying that ratio to the present facts, the impugned finding that the operation amounted to manufacture and denial of the Notification was rejected. The Tribunal accordingly set aside the Collector's order and allowed the appeal following the Larger Bench precedents.Impugned order confirmeding duty demand and denying Notification benefit set aside; appeal allowed and consequential relief granted.Final Conclusion: Following the reasoning of the Larger Bench decisions, the Tribunal held that the power-assisted hydro-extraction/drying of printed cotton fabrics is not a process of manufacture and the assessee is entitled to the exemption under Notification No. 253/82; the Collector's order is set aside and the appeal is allowed with consequential relief. Issues:1. Duty demand confirmation and penalty imposition under CE Rules and CE Act.2. Interpretation of Notification No. 253/82 regarding the process of drying fabrics.3. Consideration of Tribunal judgments in Adreena Industries and National Dyers cases.Analysis:1. The appeal stemmed from an order confirming duty demand of Rs. 32,900 under CE Rules and CE Act, 1944, along with confiscation of goods and imposition of fines and penalties. The appellants challenged this order, citing Tribunal judgments and seeking relief based on legal interpretations.2. The appellants contended that they were printing cotton fabrics since 1986 and availed benefits under Notification No. 253/82 for the process. They argued that the use of power for hydro extraction after printing did not violate the Notification. The Tribunal considered the process of drying fabrics and whether it disqualified the Notification benefits. Referring to earlier judgments, it was established that hydro-extraction or drying with power did not constitute a manufacturing process under the Notification.3. The Tribunal reviewed the judgments in the Adreena Industries and National Dyers cases, where it was held that squeezing water from fabrics using power did not hinder the Notification benefits. The Tribunal reiterated that such processes were not ancillary to manufacturing and, therefore, upheld the appellants' plea. Consequently, the impugned order confirming duty demand and penalties was set aside, and the appeal was allowed with consequential relief.