1. The 2 captioned appeals arise out of and are directed against a common Order-in-Appeal dated 28-4-1982 passed by the Central Board of Excise & Customs disposing of the appeals filed before the Board by the 2 appellants. Since the issues involved in both the appeals are similar, this common order disposes of both the appeals.
2 The facts of the case which are relevant and necessary for appreciating the dispute before us, briefly stated, are that M/s.
Siddeshwari Cotton Mills (P) Ltd. (hereinafter referred to as Siddeshwari Mills) was charged by the Central Excise authorities for contravention of the provisions of Rules 9(1), 174, 173-B 173-C, 173-F, read with Rules 173-G(1), 173-G (2), 173-G(4), and 173-G(5) of the Central Excise Rules, 1944 (hereinafter referred to as the Rules) inasmuch as they were alleged to have manufactured and removed a quantity of 6 09 848 47 sq. metres of calendered cotton fabrics falling under Item No. 19-I(b) of the 1st Schedule to the Central Excises and Salt Act (hereinafter referred to as the CET) during the period from 14-5-1981-to 19-9-1981 without obtaining a Central Excise licence, without maintaining any statutory records, without submission of price list/classification list, without observing any Central Excise formalities and without payment of Central Excise duty leviable thereon, amounting to Rs. 2,62,767.04.
(i) The allegations against M/s. Jatia Cotton Mills Ltd. (hereinafter referred to as Jatia Mills) were that they had contravened Rules 9 (1) 173-B 73-C, 173-F and 173-G of the Rules inasmuch as they had manufactured and cleared a quantity of 3.40,136.40 sq metres of cotton fabrics falling under Item No. 19-1 (b) of the CET during the period from 12-5-1981 to 19-9-1981 without payment of duty by availing of exemption under Central Excise Notifications Nos 230/77 and 231/77 both dated 15-7-1977, although they were not entiled to such exemption because they had a calendering plan? in their factory and cotton fabrics woven on powerlooms and cleared after subjecting the same to the process of calendering within the same premises were not exempt from duty under the aforesaid Notifications (ii) The Collector of Central Excise, Calcutta who adjudicated the 2 cases held that the charges levelled against Siddeshwari Mills were established. He, therefore, directed the Mills to pay duty amounting to Rs. 2,62,766.04. Further, he imposed a penalty of Rs one lakh on the Mills under Rule 173-Q of the said Rules.
(iii) In the case of Jatia Mills, the Collector similarly held that the charges levelled were established. He directed the Mills to pay duty of Rs. 25,000 under Rule 173.Q. (iv) Aggrieved with the Collector's orders, the 2 Mills went in appeal to the Central Board of Excise & Customs. By its order dated 28-4-1982. the Board upheld the Collector's order directing the appellants to pay duty on the goods already manufactured and cleared during the material period. However, it set asidethe penalties imposed on the 2 appellants. It is the Board's order confirming the demands for duty that is now under challenge before us.
3. In a short compass, therefore, the issue for our consideration is whether the calendered fabrics manufactured and cleared by the appellants were liable to be charged to duty during the material period, as held by the Collector and as confirmed by the Board.
4. The points being more or less the same, Shri Raneaswamy, the Counsel for the appellants, first took up Appeal No. 425/82-c\C and stated that barring certain minor differences, the submissions would apply to the other case as well.
(i) The appellants were engaged in calendering of cotton fabrics manufactured by powerlooms. The calendering was done by means of a plain roller calendering machine.
(ii) C.E. Notification No. 80/76 dated 16-3-1976 exempted cotton fabrics when subjected to certain specified finishing processes. One of the specified processes was calendering (other than calendering with grooved rollers). The calendering machine employed by the appellants being a plain and not a grooved calendering machine, the calendered fabrics produced by the appellants were eligible for exemption in terms of the Notification.
(iii) The powerloom fabrics which were subjected to calendering by the appellants were exempted from duty in terms of C.E. Notifications Nos. 230/77 and 231/77. These Notifications applied to powerloom units which did not have processing plant. The crux of the dispute was whether the type of calendering which the appellants were doing was "processing" or not. According to the Collector it was and according to the appellants it was not.
(iv) Apart from calendering no other process was undertaken by the appellants.
(v) On the question whether calendering amounts to a "process", the following points were put forth :- (a) Board's 2 circular letters Nos. 13 and 14/Fabrics/62-CX-VII dated 4-7-1962 and 11-7-1.962 showed that the Board did not consider calendering as a "process" for the purpose of assessment of cotton fabrics to duty.
(b) Though the Tariff Item No. 19 and Section 2(f) of the Central Excises and Salt Act were amended in 1979 and as a result of the amendment, the pre-existing situation was altered to one in which a distinction between processed and unprocessed cotton fabric was brought about, the amendments amounted to, in effect, an artificial definition. The earlier practice followed the trade understanding.
Processing of cotton fabrics did not amount to manufacture and processed cotton fabrics could not be levied to duty under Item No. 19. This was the ratio of the Gujarat High Court decision in Vijay Textiles v. Union of India, reported in 1979 E.L.T. (J-181) which was the cause for the aforesaid amendment.
(c) Even after the 1979 amendments, the law specified 6 processes and covered the unspecified processes by the expression "any other process". Applying the Rule of Ejesdum Generis, "any other process" should partake of the colour and nature of the specified processes and viewed in this light, calendering could not be said to be a "process". In the context of the aforesaid Rule, the following authorities were cited : (ii) AIR 1970 Punjab & Haryana l[(V 57 (I)]-The Printers House Pvt.
Ltd. v. Mistri Lal Dalip Singh and Ors.SCR--374-M.K. Ranganathan and Anr. v. Government of Madras and Ors.
(iv) Halsbury's "Words and Phrases" legally defined, 2nd edition, 1969.
Even after the 1979 amendment, any and every process could not be brought within the scope of the amended entry. If that was the intention, the legislature would have employed the expression "every process". Since that was not the case, the unspecified processes must be of the same genus or class as the specified processes.
(d) It could never have been the intention nor was it the practice to levy duty on calendering. The amendment of 1979 was only to regularise levy of duty on expensive processes and not on inexpensive processes like calendering.
(e) It would be anomalous if independent plain calenderers are exempted from duty in terms of Notification No. 80/76 but plain calendering by a producer of powerloom fabrics was subjected to duty.
(f) In any event, calendering was designated in the various Notifica-tions upto 1982 as a finishing process and not as a manufacturings process. The artificial enlargement of the scope of Section 2(f)' of the Act brought about in 1979 was inconsistent with the Constitutional entry No. 84, List 1 (Union List) of the 7th Schedule of the Constitution which speaks of goods manufactured or produced in India ; and calendering is not a process of manufacture.
The Tribunal should, therefore, ignore any interpretation of the tariff entry which is inconsistent with the provisions in the Constitution. In support of the proposition that the interpretation consistent with the Constitution should be preferred to one not so consistent, certain decisions were cited. In support of the proposition that there was no manufacture involved in calendering the decisions reported in 1980 E.L.T. 343 and 1979 E.L.T. 593 were cited.
(g) The Department had not adduced any evidence to show that what the appellants made and cleared was processed cloth. Even after calendering the fabric was sold as grey fabric.
(h) Because of the stand of the Department, the appellants were discriminated against in the matter of levy of duty and this violated Article 14 of the Constitution.
(i) In another appeal of Siddeshwari Mills disposed of by the Tribunal by its Order No. 516/83-D, the demand raised against the appellant was quashed on the ground that there was no clandestine removal and, therefore, Rule 9(2) was not applicable. The same is the position in the present case. Since there was no clandestine removal, Rule 9(2) had no application. The decisions in 1978 E.L.T. 399 and 1983 E.L.T. 533 were cited in this connection.
5. In addition to the aforesaid contentions, there was an additional point in the appeal filed by Jatia Mills. That is regarding the claim for freight and brokerage charges which was disallowed by the lower authorities. The learned Advocate submitted that if the decision on dutiability went against the appellants, he might be permitted to adduce evidence before the Collector in respect of the said claim.
6. The submissions of Smt. Vijay Zutshi, on behalf of the Respondent, may be summarised thus :- (i) The Board's circular letter of 1972 was not a sufficient authority for the proposition that plain calendering did not amount to "processing" or "manufacture". On the question whether calendering amounted to "processing" or "manufacture", certain technical authorities were cited :- (a) Condensed Chemical Dictionary, 10th edition, by G. Hawley, page 188; Based on these authorities it was contended that calendering was a part of the finishing of fabrics.
(ii) Applying the test of trade parlance and following the ratio of the Supreme Court's decisions in the Delhi Cloth & General Mills' case and South Bihar Sugar Mills' case, calendered fabrics were known differently from uncalendered fabrics. Section 2(f) of the Act was comprehensive and included any process incidental or ancillary to the completion of the finished product and would take within its sweep the process of calendering.
(iii) The principle of Ejesdum Generis has no application here since neither in the tariff entry nor in the notifications the narration of specific processes was followed by expressions like "other processes such as" or "Jike processes".
(iv) The vires of the 1979 amendments had been upheld by the Bombay High Court in the case of New Shakti Dye Works and Others reported in 1983 ECR 1142-D. The Court had also come to the conclusion that processed fabrics were cotton fabrics within the meaning of Tariff Item No. 19 from first principles.
(v) Once the processes have been spelt out in the law, the question whether'finishing processes were manufacturing processes became irrelevant. The decision in 1983 E.L.T. 1566 was cited in this connection. Also cited was the decision of the Kerala High Court reported in 1978 E.L.T. J 520 wherein the High Court held with reference to Item No. 22D of the CET that even the process of ironing was a process of manufacture although in that case there was no specific definition in Section 2(f) in relation to that tariff item.
(vi) The question of intention of the Government, leading to the issue of notifications, etc. again was not relevant.
(vii) The present appeal had to be considered with reference to Notifications Nos. 230/77 and 231/77 which exempted powerloom fabrics from excise duty only if no processing is done in the powerloom unit. Notification No. 80/76 which was with reference to independent processing units had no application to the present cases. The mere existence of the calendering plant in the powerloom unit would rule out the applicability of Notifications 230/77 and 231/77 whether or not the calendering plant was in fact used.
(viii) The contention with reference to the applicability of Rule 9(2)/Section 11-A was not agitated before the lower authorities. At any rate, the Tribunal has held in 1983 ECR 504D that for Rule 9 to come into play it was not essential that there should be clandestine removals.
(i) The process of calendering was not incidental or ancillary to the manufacture of grey fabric and, therefore, would not be covered by Section 2(f).
(ii) The Bombay High Court decision in the case of New Shakti Dye Works was with reference to sophisticated processes like bleaching, printing, dyeing, etc. That decision would not, therefore, help the Department.
(i) Whether the calendered fabrics manufactured and cleared by the appellants were liable to be charged to duty during the material period, as held by the Collector and as confirmed by the Board; 9. We shall first deal with the question whether calendered fabrics were dutiable during the material period. In order to appreciate the dispute it is necessary to understand clearly what is meant by "calendering". Here we may observe straightaway that Shri Rangaswamy urged before us that the meaning assigned to this expression in foreign works of reference should not be considered as a good basis for the present dispute which is with reference to the Indian conditions. We do not see any force in this argument because calendering as a process in textile industry has a distinct connotation and this connotation cannot be different in different countries. We have also the benefit of the meaning assigned to this expression by the Indian Standards Institution.
In Modern Textiles by Dorothy S. Lyle (page 244-published by John Wilay & Sons, N. York) under the caption "Finishes that provide Aesthetic Values", the following is stated :- This is the simplest of all finishes used to give a good appearance to the finished fabric. It consists of passing the fabric between the heated cylinders of a calendering machine. It is simply ironing a fabric to make it smooth and give it a lustrous surface. The round yarns are flattened, hence reflect more light. It is a temporary finish, since the yarns revert to their round shape with steaming, laundering, and dry cleaning. Examples of calendered fabrics are sheeting, poplin, and broadcloth, both cotton and wool." "Calender (Paper, Textiles, etc.)-A machine, generally consisting of a number of vertical rollers (or bowls), heated or unheated, through which material is passed under pressure, to impart the desired finish (dull, glazed, etc.) or to ensure uniform thickness".
"Calendering-is a final process in which heat and pressure are applied to a fabric by passing it between heated rollers, imparting a flat, glossy, smooth surface. Lustre increases when the degree of heat and pressure is increased. Calendering is applied to fabrics in which a smooth, flat surface is desirable, such as most cottons, many linens and silks, and various man-made fabrics. In such fabrics as valveteen, flat surface is not desirable and the cloth is steamed while in tension, without pressing. When applied to wool, the process is called pressing and employs heavy heated metal plate to steam and press the fabrics. Calendering is not usually a permanent process." The following is an extract from "Textile Terms and Definitions" edited by Carolyna A. Farnfield and P.J. Alvey (Published by Manchester Textile Institute) (1975) 7th edition (page 27)- (i) To pass fabric through a machine as above, normally to smooth and flatten it, to close the inter-sections between the yarns, or to confer surface glaze. Special calenders with an engraved heated bowl imprint a pattern in relief (see emboss) or modify the fabric surface to give high lustre (see schreiner),...".
IS : 2244-1972 ("Glossary of Terms relating to treated fabrics") published by the Indian Standards Institution says : "Calender-A machine comprised of at least three heated rollers, used to produce film and sheet material." "Calendering-A mechanical method done by rollers to provide glaze, glossiness, hardness, lustre, shine, and even embossed designs to fabrics. Calendering is usually done to impart a special finish to fabrics." 10. From the above extracts from technical authorities, it is clear that calendering, as understood in the textile industry and as recognised by the Indian Standards Institution, is a finishing process designed to smooth and flatten fabric and to close the inter-sections between the yarns or to confer surface glaze. That calendering is a finishing process is not in dispute. What is in dispute is that calendering of grey powerloom fabrics does not constitute a manufacturing activity which brings the calendered fabrics within the mischief of Item 19 (1) (b) of the CET. It is relevant to note here that following the judgment of the Gujarat High Court in Vijaya Textiles v. Union of India-1979 E.L.T. (J 181), Parliament amended Tariff Item No. 19 (and Items 22 and 21) and the definition of "manufacture" in relation to these tariff items by the Central Excise and Salt and Additional Duties of Excise (Amendment) Ordinance, 1979 on the 24th November, 1979 with retrospective effect. The Ordinance was later replaced by a Bill which was passed into an Act. The Gujarat High Court had held that the term "fabric" as used in the tariff description "cotton fabric" (prior to the amendment) would refer to something that is woven; hence it can relate only to cloth in the grey stage; processing of the grey cloth, either by bleaching, dyeing or printing did not amount to manufacturing and both before and after processing it remained a fabric falling within the same item of the CET. It was following this judgment that the Ordinance referred to earlier came to be promulgated which was ultimately replaced by a Bill which was passed into an Act. The statement of Objects and Reasons attached to the Bill says that the Gujarat High Court judgment would have the effect of disturbing the balance evolved between the different sectors of the textile industry and the legislation was with the object of overcoming the difficulty which had arisen as a result of the said judgment.
Section 2(f) of the Central Excises and Salt Act as also the Tariff Item No. 19 were amended by the aforesaid legislation so as to bring "processing" within the definition of "manufacture" in relation to cotton fabrics and to expressly provide for the levy of duty on processed fabrics distinctly and differently from unprocessed fabrics.
Therefore, it is no longer open for anyone to argue that "processing" does not amount of "manufacture" within the meaning of Section 2(f) or that processed fabrics are not chargeable to duty under Item 19 CET. It is useful at this stage to note that the Bombay High Court before whom the vires and validity of the aforesaid amendments were challenged, upheld the vires and validity of the amendment in its judgment in the case of New Shakti Dyeing Works v. Union of India-1983 E.L.T. 1736 (Bom.) 11. Shri Rangaswamy has strenuously urged before us that, in spite of the amendments adverted to, the process of calendering and calendered fabrics would not come within the mischief of the amendments. In order to appreciate the point, it is useful to set out the amendments effected to Section 2(f) of the Act and to Item No. 19 CET. "in relation to goods comprised in Item No. 19-1 of the First Schedule, includes bleaching, mercerising, dyeing, printing, water-proofing, rubberising, shrink-proofing, organdie processing or any other process or any one or more of these processes" ; "in Item No. 19, for sub-item 1, the following sub-item shall be substituted, namely :- 1. Cotton fabrics, other than (i) embroidery in the piece, in strips or in motifs, and (ii) fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials-(a) Cotton fabrics, not subjected to any process Twenty percent cent(b) Cotton fabrics, subjected to the process of Twenty perbleaching, mercerising, dyeing, printing, water- centproofing, rubberising, shrink-proofing, organdie ad valorem.processing or any other process or any two or moreof these processes." 12. Shri Rangaswamy's contention is that calendering is not of the same genus as the specified processes. The words "any other process" would take in only such processes as are similar to or belong to the same class as the specified processes. In the processes specifically enumerated in Section 2(f) and Tariff Item No. 19-1, there is addition of some material. In calendering there is no such addition. The former are sophisticated and expensive processes ; the latter is a simple and inexpensive process. It could not have been the intention to tax the simple process of calendering along with the expensive processes of the nature enumerated. This line of argument rests on the principle of Ejusdem Generies.
13. The phrase Ejusdem Generis, as held in AIR 1970 (Punjab and Haryana)-Volume 57CI, in the case of the Printers House (Pvt.) Ltd. v.Misri Lal Dalip Singh, is merely a rule of construction and not a rule of substantive law and is hardly applicable where the intention of the Act is otherwise clear. The phrase literally means "of the same kind or species". If a general word is added to specific words, the general word would take its colour from the specific words. In M.K. Ranganathan and Anr. v. Government of Madras and Ors. -2 SCR 1955, 374, the Supreme Court held that it is a legitimate rule of construction to construe words in an Act of Parliament with reference to words found in immediate connection with them. It is also a well recognised rule of construction that the legislature docs not intend to make a substantial alteration in the law beyond what it explicitly declares either in express words or by clear implication and that the general words of the Act are not to be so construed as to alter the previous policy of the law, unless no sense or meaning can be applied to those words consistently with the intention of preserving the existing policy untouched.
Citing a few Supreme Court decisions, the book "Principles of Statutory Interpretation" by G.P. Singh, C.J., says at page 333 that the rule of Ejusdem Generis has to be applied with care and caution. It is not an inviolable rule of law, but it is only permissible inference in the absence of an indication to the contrary, and where context and the object and mischief of the enactment do not require restricted meaning to be attached to words of general import, it becomes the duty of the Courts to give those words their plain and ordinary meaning. The book goes on to say, quoting Lord Scarman, "If the legislative purpose of a statute is such that a statutory series should be read ejusdem generis, so be it ; the rule is helpful. But, if it is not, the rule is more likely to defeat than to fulfil the purpose of the statute. The rule like many other rules of statutory interpretation, is a useful servant but a bad master".
14. Against the above background, we may now examine Shri Rangasw-amy's contentions. There is prima facie nothing in the language employed in Section 2 (f) and Item 19-1 of the CET to suggest that the words "any other process" will take within their sweep only such processes as are of the same class or genus as the specifically enumerated processes. It may be that for the enumerated processes some extraneous substance may be required. That, however, would not make the processes a class. The enumerated processes form a group of disparate and dissimilar processes, for example, bleaching and rubberising or dyeing and organdie processing. Significantly, what follows the enumerated process is not an expression like "any other like process" or "any such process", in which case it could be argued that the non-enumerated process should be of the same genus or class as the enumerated ones.
According to Section 2(f), "manufacture includes any process incidental or ancillary to the completion of a manufactured product". In relation to Item No. 19-1 CET, Section 2(f) specifically makes processing of cotton fabrics fall within the meaning of "manufacture". Item No. 19-1 specifically and separately makes cotton fabrics not subjected to any process and cotton fabrics subjected to processing excisable. We do not find anything to suggest that the expression "any other process" is not wide enough to cover any process recognised as a process in the cotton textile industry. Admittedly, calendering is a finishing process. The machine employed may be a simple or complex one. The effect sought to be brought about may be a simple one or not. That, however, would not mean that calendering is not a process. In fact, from the sample produced by the appellants before us it was seen that the appellants had stamped cotton sarees as calendered. It was stated before us that the sarees were sold as calendered sarees. Calendering will thus fall within the ambit of the expression "any other process" occurring in Section 2(f) and Item 19-1 CET, particularly when sub-item (b) of Item I9-I is read in juxtaposition with sub-item (a) which covers cotton fabrics not subjected to any process.
15. The question whether calendering is a process of manufacture or calendered fabrics fall within the mischief of Item 19-1 CET is no longer open to question because of the amendments brought about in Section 2(f) and Item No. 19-1 CET.Deputy Commissioner of Sales Tax, Ernakulam v. Pio Food Packers-1980 E.L.T.343 (S.C.)-in support of his contention that the process of calendering does not amount to "manufacture". It was held in this case that although the nature and extent of processing may vary from one case to another, yet it is only when the change, or a series of changes take the commodity to a point where commercially it is recognised as a new and distinct article, then the manufacture is said to have taken place.
This was with reference to the Kerala Sales Tax Act. In the matter before us, we have the amended Section 2(f) and Item No. 19-1 CET to which we have already adverted and concluded that calendering comes within the definition of "manufacture". It is also worth noting that calendered fabrics are a commercially known commodity as evidenced by the appellants, distinct from grey un-processed fabrics.P.C.Cheriyan v. Mst. Barfi Devi-1979 E.L.T. (J 593) in which the Court held, interpreting the Transfer of Property Act, that retreading of old tyres does not bring into existence any new or commercially distinct article and is not a process of "manufacture". For the reasons given earlier, the ratio of this decision, in our opinion, is not applicable to the facts of the present case viewed in the light of the legislative changes brought about.
17. The Departmental Representative has, on his part, cited the Kerala High Court decision in Metro Readywear Company v. Collector of Customs- 1978 E.L.T. J-520, wherein the Court held with reference to Item 22D of the CET ["articles of ready-to-wear', apparel (known commercially as 'ready made garments')...in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power"] that the process of ironing that was applied to stitched brassiers prior to their packing was a process incidental to completion of the brassiers as a manufactured product since the said process was intended to give a finishing touch in order to render them marketable ready-to-wear garments. In the present case, calendering is admittedly a finishing process required in the production of calendered fabrics as a markeable commodity. The ratio of the Kerala High Court decision supports the view which we have already expressed.
18. Shri Rangaswamy argued that though the fabrics were cleared as calendered, they were nevertheless known in the trade as grey fabrics and not as processed fabrics. This argument is devoid of force. For one thing, we have already concluded that calendering is included in "any other process" in Item No. 19-1 CET. The tariff item is sub-divided into 2 sub-items and the word "grey" is not to be found therein. The division is on the basis whether the fabric is subjected to any process or not. For another, we find from page 91 of the book "Textile Terms and Definitions" by the Textile Institute, Manchester, that grey goods mean "woven or knitted fabrics as they leave the loom or knitting machine, i.e. before any bleaching, dyeing or finishing treatment has been given to them". The goods under consideration are not grey goods in this sense of the term; they were subjected to the finishing process of calendering.
19. We have now to consider whether the appellants were entitled at the material time to the exemption contained in Notifications Nos. 230 and 231 both dated 15-7-1977. Both these notifications are similarly worded except that the first one confers exemption from basic excise duty and the second one from the additional duty of excise. These notifications exempt unprocessed cotton fabrics falling under sub-item (1) of Item No. 19 CET, manufactured in factories commonly known as powerlooms (without spinning or processing plants) subject to the specified conditions and exceptions. The appellants admittedly were manufacturers of unprocessed cotton fabrics by employing power-looms. The question is whether they could be said to have been without a processing plant.
There is no specific definition of the expression in the notification but in the light of our findings that calendering is a process, the calendering machine would be a processing plant within the meaning of the notifications. Therefore, the concessions contained in these notifications were correctly denied by the lower authorities to the appellants.
20. The appellants have contended that they were entitled to the benefit of Notification No. 80/76 dated 16-3-1976. This notification exempts cotton fabrics when subjected to certain specified finishing processes from the whole of the excise duty leviable subject to prescribed conditions. There is an explanation to this notification to the effect that the process of calendering, other than calendering with grooved rollers, in a factory engaged solely in such process shall not be considered to be a "further process" for the purpose of Clause (ii) of the proviso. The proviso itself refers to bleached, dyed or printed fabrics. In the present case no contention has been raised before us that the fabrics were bleached, dyed or printed. Apart from that, as the explanation makes it clear, it is meant to apply only to factories solely engaged in the process of calendering other than calendering with grooved rollers. The appellants were not such a factory. In the circumstances, the said notification has no application to the appellants.
21. Shri Rangaswamy had cited Board's Circulars Nos, 13 and 14 of 4-7-1962 and 11-7-1962 in support of his contention that the process of calendering does not constitute "processing". Apart from the fact that these Circulars have no binding force and they had been issued with reference to Notification No. 111/62 dated 13-6-1962 which is not the notification before us, we have to consider the question in the light of the definition of "manufacture" in Section 2(f) of the Act and the Tariff Item 19-1 as they stand amended with retrospective effect and come to a finding on the question. We have already given our conclusion in this regard. Reliance on the Board's Circulars is, therefore, of no avail.
22. Shri Rangaswamy has urged that if the 3 notifications are read in such a way that the appellants are discriminated as against independent units undertaking plain calendering, that would amount to discrimination violative of Article 14 of the Constitution. We need only say that this Tribunal is not the forum before which this contention can be pressed.
23. We have now to deal with the appellants' contention that the demands raised against the appellants deserve to be quashed on the ground that Central Excise Rule 9(2) had no application to the present cases since there was no clandestine removal of goods. In this connection, the decisions in 1978 E.L.T. 399 and 1983 E.L.T. 533, and the Tribunal's Order No. 396/83-D were cited and relied upon. The Senior Departmental Representative, on his part, contended that the applicability of Rule 9(2) was not agitated before the lower authorities and that the Tribunal had held in 1983 ECR 504-D (CEGAT) that for Rule 9(2) to come into play it was not essential that there should be clandestine removals.E.L.T. J-399 (N.B. Sanjana v. Elphinstone Spinning & Weaving Mills Co. Ltd., the Supreme Court held that to attract Sub-rule (2) of Rule 9, the goods should have been removed in contravention of Sub-rule (1), i.e. clandestinely without assessment. If the goods have been removed with prior permission of the Excise authorities. Rule 9(2) will not apply. In that case, the goods were cleared by the Respondents on the basis of applications made to the proper Excise officer who had passed orders of assessment to 'nil' duty. It is in these circumstances that the Court held, as stated earlier, that there was no clandestine removal without assessment and that, therefore, Rule 9(2) had no application.Hydraulics Ltd., Madras v. Collector of Central Excise, Madras), the Tribunal observed that Rule 9(2) was resorted to because there was suspicion that there had been suppression of facts in respect of which demands were issued but the demands were enforced by exercising powers under Rule 10, i.e. under circumstances different from the ones in the mind of the issuer of the show cause notice.
Therefore, the issue of notice under Rule 9(2) was held to be incorrect and was struck down.
25. In the appeal of Siddeshwari Mills, the allegation was that they manufactured and cleared a quantity of calendered cotton fabrics without obtaining a Central Excise licence, without maintaining any statutory records, without submission of price lists/classification lists, without observance of Central Excise formalities and without payment of Central Excise duty. It is clear, therefore, that there were no assessments and the clearances of goods were not in accordance with the various provisions of the Central Excise law including Rule 9(1).
It is true that the Board, in appeal, set aside the penalty imposed on Siddeshwari Mills taking the view that the non-payment of duty was more due to misunderstanding or mis-interpretation of the provisions of law than as a result of an intent to evade the duty payable. It was further held by the Board that though there were contraventions of law, the circumstances were such that no penal action was warranted. Since the appellants had manufactured and cleared excisable goods without observing excise formalities, Rule 9(2) was, in our view, correctly invoked.
In the case of Jatia Cotton Mills also, it is apparent that there were no assessments and they had manufactured and cleared calendered cotton fabrics without payment of the duty leviable thereon although they were not entitled to exemption from duty. The only difference from the Siddeshwari Mills' case is that Jatia Cotton Mills were holding a Central Excise licence. This difference is not, however, material to the findings in the case inasmuch as they, like Siddeshwari Mills, manufactured and cleared excisable goods without following the provisions of Central Excise law including Rule 9(1). Hence, in their case, too, Rule 9(2) had been correctly invoked.
26. Shri Rangaswamy has drawn our attention to Order No. 396-D/83 in Appeal No. ED(SB) (T) 292 of 1982-D in another appeal filed by Siddeshwari Mills. In that order the Tribunal had held, after taking into consideration the facts and circumstances and the Board's Order-in-Appeal dated 28-4-1982 (which is the impugned order before us) that there being no contumacious conduct attributable to the appellants as contemplated under proviso to Section 11A of the Central Excises and Salt Act, only the normal period of six months for issuing show cause notice was available for the purpose of recovery of the duty which escaped assessment and duty. In the case of Siddeshwari Mills now before us, the show cause notice was dated 12-11-1981 and the period covered was 14-5-1981 to 19-9-1981. Similarly, in the case of Jatia Mills, the show cause notice was dated 10-11-1981, the period covered being 12-5-1981 to 19-9-1981. In both the cases, therefore, the demands are well within the prescribed time-limit. As such, we do not think that the Tribunal's earlier Order No. 396-D of 1983 has any relevance or application to the facts of the present cases.
27. Lastly, we have to deal with Shri Rangaswamy's prayer that in the case of appeal filed by Jatia Cotton Mills, there is an additional point regarding the claim for freight and brokerage charges which was disallowed by the lower authorities. It is seen from the Collector's Order-in-Original that the appellants were not able to prove from their account books before the Collector whether the so-called delivery charges were actually incurred at the stated rate. In the absence of this information, the Collector held that the delivery charges could not be arbitrarily excluded from the assessable value. The Board in its Order-in-Appeal has stated that, except for making a vague contention, the appellants had not tried to give any details of the charges and, therefore, the Collector was correct in rejecting the contention. Even at this stage, apart from certain submissions, no material has been placed before us by the appellants to enable us to consider whether this aspect of the matter should be remanded to the Collector for a fresh determination. As such, we do not accept Shri Rangaswamy's prayer that this aspect of the matter may be remanded to the Collector and that he might be permitted to adduce evidence before the Collector in this behalf.