1. The facts, in a brief compass, in this Revision Petition to the Government of India, transferred to and heard by, the Tribunal as an Appeal pursuant to S. 35P of the Central Excises & Salt Act, 1944 (the Act, for short) are (a) the Appellant manufactures cotton yarn falling under Item No. 18A (1) of the First Schedule to the Act. The yarn so manufactured is utilised in the manufacture of fabrics. At times, the yarn is cleared, as such, on payment of duty; (b) yarn in the form of langled waste was cleared in the month of April, 1978 under Gate Passes Nos. 308, 309 and 326; (c) on 25-5-1978, a notice was issued requiring the Appellant to show cause to the Assistant Collector as to why duty in a sum of Rs. 2.569.63 should not be recovered under Rule 10(1)(a) of the Central Excise Rules, 1944. As would appear from the particulars appended to the notice, the demand for payment of duty was in relation to waste cotton yarn in tangled form on the basis of duty leviable on the highest count manufactured by the Mills in respect of the clearances in the aforesaid 3 Gate Passes; (d) the Appellant replied by letter dated 7-6-1978 to the aforesaid notice to show cause and, according to the Appellant, a personal hearing in the matter was fixed before the Assistant Collector on 22-8-1978; (e) nevertheless, on 16-8-1978, the Assistant Collector had informed the Appellant by a letter that the short levy covered by notice to show cause was already pointed out in the RT 12 Returns for cotton yarn in the month of May, 1978. Since, however, the Appellant was reluctant to pay the short levy, the Superintendent had issued a notice to show cause. The Appeal lay against the assessment made by the Superintendent on RT 12 to the Appellate Collector f Central Excise, Bombay. Accordingly, he refused to interfere with the decision taken by the Superintendent; (f) on the dismissal of an Appeal filed against the orders of assessment on the aforesaid RT 12 Returns as well as the notice to show cause aforesaid, the Appellant urged, inter alia, that (i) the original assessment on RT 12 was in violation of the principles of natural justice, since no opportunity to present his case was afforded to the Appellant. Indeed, there was no notice to show cause against the assessment at that stage. The notice to show cause issued subsequently did not result in the proper adjudication.
The assessment under RT 12 Returns as well as the proceeding initiated by the notice to show cause, were, therefore, rendered illegal and could not have been confirmed by the Appellate Collector; (ii) the exemption for waste cotton yarn falling within Notification No. 95/61-CE dated 1-4-1961 had been specifically claimed in the Classification List dated 4-3-1978 and approved also; (iii) in terms of the aforesaid Notification, the stage at which the waste cotton yarn should result, so as to be eligible to the benefit of the exemption contained therein, had not been specified. It was, there-fore, incorrect to say that the waste should have arisen at the spindle point before the cotton yarn was sent for sizing; (iv) in any view, the count of the yarn cleared under the aforesaid Gate Passes was never 34s. It was either 26s or 14s. The yarn could not, therefore, be assessed to duty applicable to count No. 34s.
2. It would appear to us on a perusal of the records and on the submissions made, that (a) the Appellant is correct in his submission that the proceeding below had become vitiated in consequence of failure to afford an opportunity to be heard at the time of the RT 12 assessment and the failure to adjudicate on the notice to show cause subsequently issued; (b) the case is one that should call for remand as prayed for in the Application for Revision, for proper adjudication on the show cause notice; (c) even so, since the matter was heard at length by us, we would, instead of remanding the matter, dispose it of ourselves; (d) Notification No. 95/61-CE, as amended from time to time and applicable to the period in question, did not, on its terms, prescribe that the benefit contained therein should be availed by waste cotton yarn resulting at any particular stage whatsoever. It cannot, therefore, be insisted that it is only the waste that results at the spindle point that is entitled to the benefit of the exemption; (e) again, it is on "manufacture" of cotton yarn that the levy is imposed under Item 18A of the First Schedule to the Act. Such "manufacture" includes any process incidental or ancillary to the completion of a manufactured product, namely, yarn in terms of the inclusive definition of the word "manufacture" in S. 2(f) of the Act. Sizing is, undoubtedly, a process incidental or ancillary to the completion of the manufacture of the yarn exigible to duty under Item 18A of the First Schedule; (f) that this was so, was clarified by the amendment made to the aforesaid S. 2(f) in 1964 wherein it was clarified and put beyond doubt that "manufacture' in relation to goods comprised in Item No. 18A of the First Schedule includes sizing. It cannot, therefore, be contended that the benefit of exemption contained in Notification No. 95/61 cannot extend during the relevant period to cotton waste resulting on sizing of the yarn.
3. In view whereof, we allow the Appeal, quash the unadjudicated notice to show cause and direct that the Appellant be given all consequential relief, if any.