1984 (9) TMI 274

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....mand was raised on account of the exemption notification No. 78/76-C.E., dated 16-3-76 An exemption notification can only grant relief from payment of duty; it cannot impose duty reliance on 1978 [E.L.T. J 211 (Patna) - M/s. Bata India Ltd. v. Assistant Collector of Central Excise, Patna) (2) Duty can be collected only on the end product; otherwise repeated taxation at intermediate stages would lead to absurd results [reliance on 1982 E.C.R. 487 = 1983 E.L.T. 54 (P. & H.) (Punjab & Haryana) Punjab Rubber & Allied Industries v. U.O.I. (3) The process of dyeing by the appellants did not amount to manufacture of a new commodity [reliance on 1975-CENCUS-90 (Bombay) = 1977 E.L.T. (J 34) - The  Empire Dyeing & Manufacturing Co. Ltd. v. V.P. Bhide & others and 1979 E.L.T. J 181 (Gujarat) - Vijay Textiles v. U.O.I.). (4) The process undertaken by'the appellants was not even a process of dyeing as they applied a kutcha dye. The colour not being fast, the dyed fabrics were not saleable in the market and were, therefore, not "goods". (5) There was total non-application of mind in issuing the show cause notice. The notice was issued under the then rule 10A but the demand was c....

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.... as applicable at the relevant time under rule 10. 4. In a brief rejoinder, the appellants stated that they were not liable to pay the processing duty in spite of the amended Section 2(f)of the Central Excise and Salt Act, 1944 as well as the amended description of Tariff Item 19-I,both with retrospective effect, because, unlike M/s New Shakti Dye Works and Mahalaxmi Dyeing & Printing Works, the appellants were not a processing house and the dyeing activity was not a finishing process in their case. 5. We have carefully considered the matter. The Bombay High Court judgment in the case of The Empire Dyeing & Manufacturing Co. Ltd. and the Gujarat High Court judgment in the case of M/s. Vijay Textiles relied on by the appellants are clearly distinguishable. Both these judgments were state given in the context of the old Tariff Item 19 when the description of this Item had no separate sub-classifications for grey fabrics and processed fabrics. After the said judgments, the law itself was amended through the Central Excises and Salt and Additional Duties of Excise (Amendment) Ordinance, 1979 promulgated on 24-11-79, later replaced by the Central Excises and Salt and Add....

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....mended rules stated that duty was payable even on goods removed for captive consumption in a continuous process in a factory. Through the Finance Act of 1982, these amendments were given retrospective effect from 1944. Secondly, in the case of the appellants it cannot even be said that their dyeing of grey fabrics was in the course of a continuous and uninterrupted process. Thirdly, it is not a case where full duty was being charged once more from the appellants in addition to the duty already paid on grey cotton fabrics The provisions of rule 56A read with the terms of exemption notification No. 78/76-C.E., dated 16-3-76 ensured that only the net processing surcharge was collected and the appellants were on par with any other manufacturer of cotton fabrics who cleared such fabrics after dyeing. The Punjab & Haryana High Court judgment, therefore, does not help the appellants' case. 7. The appellants are not correct in stating that the Department had construed the exemption notification as if it imposed the dyeing duty. A reading of the show cause notice as a whole clearly brings out that upto 16-3-76, when the duty on cotton fabrics was payable at specific rates, the proce....

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....on given in ordinary dictionaries, and we find that it makes no distinction between kutcha dyeing and pucca dyeing. But even apart from these definitions, we find in everyday life that all dyed fabrics do not necessarily have fast colour. This matter was discussed in quite some detail during the hearing before us. The Bench pointed out to the appellants the case of "Bleeding Madras" which was a range in the international market some years ago. This variety of cloth was deliberately dyed in kutcha colours. The appellants stated that Bleeding Madras was no longer in fashion but they themselves mentioned the case of modern day fading jeans. The cloth of these jeans was deliberately so dyed that the colour faded in patches in due course of wear. It cannot, therefore, be said that kutcha dyeing is not dyeing. Section 2(f) of the Act and Item 19-I of the Tariff, as amended and reproduced above, make no distinction between kutcha dyeing and pucca dyeing. These provisions do not also say that dyeing or processing must be undertaken by a processing house and should be the finishing process in order to be taxable. We, therefore hold that once the appellants applied a dye to the grey fabrics,....