1996 (6) TMI 236 - AT - Central Excise

High Court Clarifies Duty Payment for Fabric Lamination Exemptions

The Tribunal referred a question to the High Court for clarification on whether base fabrics removed for lamination could be cleared without duty payment ... Reference to High Court Issues:Interpretation of Rule 96D of the Central Excise Rules, 1944 regarding the removal of fabrics without payment of duty for processing, specifically in the context of lamination.Analysis:The judgment pertains to a reference application arising from an order of the Tribunal regarding the demandability of duty for goods previously cleared duty-free but later found to have been erroneously permitted. The issue revolves around the interpretation of Rule 96D of the Central Excise Rules, particularly concerning the removal of fabrics without duty payment for processing. The Department argued that lamination of non-woven fabrics does not fall under the processes recognized under Central Excise Law, thus duty could be demanded for the past period. The respondents contended that the permission under Rule 96D was rightly accorded for lamination. The Tribunal examined Rule 96D, emphasizing that fabrics can be cleared duty-free if intended for processing in another factory of the manufacturer. The key question was the scope of the term 'process of fabrics' in Rule 96D.The Tribunal noted that there was no specific definition of 'process of manufacture' under Rule 2(f) or Rule 96D concerning fabrics. The definition of process in the context of fabrics falling under specific chapters was outlined in the tariff. The term 'process' for Rule 96D had to be understood in connection with the tariff scheme for different fabric categories. The Tribunal highlighted that the processes mentioned in the tariff were for specific products falling under certain headings, and the term 'process' had an extended meaning akin to 'manufacture.' Thus, for Rule 96D, the processes under the relevant tariff headings had to be considered. The Revenue contended that the processes altered the base fabrics into different products, making duty payment necessary.Citing a previous Tribunal ruling, the Tribunal concluded that a question of law arose regarding the interpretation of the term 'process' in Rule 96D. Consequently, the Tribunal referred the question to the High Court for clarification: whether base fabrics removed for lamination could be cleared without duty payment under Rule 96D of the Central Excise Rules, 1944. This decision highlights the importance of interpreting statutory provisions like Rule 96D in the context of relevant tariff classifications and definitions to determine the applicability of duty exemptions for specific processes like lamination of fabrics.