TaxTMI 
TaxTMI 
1988 (2) TMI 381
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.... market and subjected by the appellants in their premises to the process of "sitralisation", a process patented by the South India Textile Research Association ("SITRA"), Coimbatore. The Central Excise staff visited the unit on 19-5-1986 and found the appellants engaged in this actively without obtaining a Central Excise manufacturing licence for the goods. They seized the stocks of the fully manufactured goods and drew samples for test. The Chemical Examiner reported on the samples thus:- "the sample is in the form of a flat narrow woven tape composed of cotton impregnated with a polymer (Polyamide type). Base cotton fabric - 91% (approx) Polymer (Polyamide) - 8% ('') Note : It is seen from the write up enclosed along with the test ....
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....ned order confirming the demand for duty as set out in the show cause notice and imposed a penalty of Rs. 25,000/- on the appellants. 4. We have heard Shri P.S. Nagarathnam, Consultant, for the Appellants and Smt. V. Zutshi, SDR, for the Respondent Collector. 5. The central issue for determination is whether "sitralisation" is a process of "manufacture" which would bring the processed fabric into the mischief of Item No. 19 III of the CET, 1944, and Heading No. 59.09 of the CET, 1985. The other important issue is whether the appellants are liable to pay the duty demanded. Before we consider the rival contentions, we may note the details of the aforesaid process set out in the Collector's order :- "The tapes are first treated with sodium ....
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....c.) are alleged and proved to exist. 7. In this context, it is pertinent to note that the Collector himself observes in para 21 of his order (though with reference to the question of penalty):- "On perusal of the entire evidence, I find that there is scope for an honest difference of opinion between the assessee and the Department on the classification of such product. Even then in such cases it is not correct for the assessee to arrive at the conclusion unilaterally, as by doing so he would fall prey to the extended period under Section 11A especially as the respondent company is headed by a highly qualified technocrat." 8. The show cause notice dated 21-3-1987, alleged that the appellants contravened various (specified in the notice) p....
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....-1984 issued by the Superintendent of Central Excise, Range III. The licence authorised the appellants "to obtain (without payment of the whole or part of the duty) leviable thereon Nylon Waste to be used by him/them in the manufacture of Chemically Treated Spindle Tapes during the three-year ending the 31st December, 1986.......". So it is clear that the department had knowledge of the fact of appellants' manufacture of chemically treated spindle tapes and, in fact, had permitted them to obtain nylon waste for the purpose. From a show cause notice No. V/5503/15/44/86, dated 31-12-1987, issued by the Assistant Collector of Central Excise, Coimbatore III Division to the appellants (copy Filed by the appellants), it is seen that the appellant....
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....se officers as to their liability to pay duty on their product. The decision on the complex question as to the classification of their product was made by themselves. No other conclusion emerges from this than that they deliberately evaded payment of duty. 20. This position continued even after the switch-over to the new Central Excise Tariff, 1985. The respondents insisted on classification of such tapes under Chapter Heading 52 and claiming exemption under Notification No. 45/86, dated 10-2-1986, thus attempting to keep their product on the same level as Tariff Item 19/1 under the old Central Excise Tariff read with Notification No. 250/82-Central Excise. The Department's stand that the products would fall under chapter Heading 59.09 is ....