Cropping and shearing of pile fabrics treated as integral manufacturing process, supporting prima facie waiver of pre-deposit.

Cropping or shearing of pile fabrics was treated as a process integral to manufacture where it was necessary to make the fabric uniform, suitable for use and marketable. On that prima facie basis, and in light of earlier decisions supporting the assessee's view, the Tribunal found a reasonably good case for claiming the benefit of Notification No. 109/86. The controversy was not free from doubt, but it was sufficient to justify relief at the pre-deposit stage. Partial waiver of the demanded duty and penalty was granted, subject to deposit of Rs. 20 lakhs, with the balance waived.

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Issues: Whether the applicant was entitled to waiver of pre-deposit of the demanded duty and penalty on a prima facie showing that cropping or shearing of pile fabrics was an integral process of manufacture for claiming the benefit of Notification No. 109/86.

Analysis: Pile fabric requires projecting fibres on one surface to be rendered of uniform length and suitable for use and marketability. A process necessary to achieve that result may be treated as part of manufacture rather than a post-manufacture operation. The Tribunal found that the earlier decisions supporting the assessee's view on shearing and cropping gave it a reasonably good prima facie case, though the controversy was not free from doubt.

Conclusion: The applicant was granted partial waiver of the duty and penalty on condition of depositing Rs. 20 lakhs, with the balance waived.

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