Shearing does not convert grey fabrics into processed fabrics under Rule 49A, preserving unprocessed fabric duty treatment.

Shearing did not make grey fabrics into processed fabrics for Rule 49A purposes, as the governing principle already settled by the Supreme Court treated such fabrics as remaining unprocessed. On that basis, yarn duty on the cellulosic spun yarn was payable at the appropriate rate plus 1.5% of the duty for unprocessed fabrics under Rule 49A(1). The separate question on addition of Dharmada was not examined further because it did not affect the result.

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Issues: Whether fabrics continued to be unprocessed under Rule 49A after shearing so that yarn duty was payable only at the appropriate rate plus 1.5% of the duty, and whether the question of addition of 'Dharmada' required adjudication.

Analysis: The applicable legal framework distinguished between grey (unprocessed) fabrics and fabrics cleared after processing. The governing principle, as already settled by the Supreme Court, was that shearing did not convert the fabrics into processed fabrics for the purpose of Rule 49A. On that basis, the relevant yarn duty for unprocessed fabrics was the appropriate duty together with 1.5% of the duty payable on the cellulosic spun yarn. The question relating to 'Dharmada' was not examined further because it did not affect the result.

Conclusion: The fabrics were held to remain unprocessed despite shearing, and duty was payable under Rule 49A(1) at the appropriate rate plus 1.5% of the duty; the assessee succeeded on that issue, while the 'Dharmada' issue was not gone into.

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