1. The appellants, M/s. Moti Dye Works are processors of man-made fabrics. They had been availing themselves of exemption under Notification No. 79/82, dated 28-2-1982 on the ground that the processes of bleaching and dyeing were being carried on by them with the aid of machines but without aid of power. They were accordingly paying duty at the reduced rates. Later, Show Cause Notice dated 30-4-1983 was issued to them pointing out that the process of hydro-extraction was carried on with the aid of power and they were, therefore, not entitled to exemption under the notification above noted. On adjudication the Assistant Collector held that hydro-extraction was not a manufacturing process under Section 2(f) of the Central Excises and Salt Act. But later under proceedings under Section 35E(4) of the Act the Collector, Central Excise (Appeals), set aside the order of the Assistant Collector and restored the demands issued by the Range Superintendent. It is against the said order that the present appeal has been preferred.
2. We have heard Shri Gopal Prasad, Consultant, for the appellants and Shri K.D. Tayal, Senior Departmental Representative, for the respondent. We have perused the records.
3. The facts are not at all in dispute. The appellants are processors of man-made fabrics carrying out processes of bleaching and dyeing.
Admittedly, power is used by them in the process of hydro-extraction.
But their contention is that this process of hydro-extraction would not amount to manufacture as defined in Section 2(f), as the process of bleaching and dyeing is complete even before hydro-extraction. They, therefore, contend that they are entitled to benefit under Notification No. 79/82. On the other hand, the Collector had held that hydro-extraction has also been mentioned as a process of manufacture in Notification No. 297/79-CE, dated 24-11-1979 and as the same is carried on in the present instance with the aid of power, the appellants were not entitled to benefit under Notification No. 79/82. The appellants had, before the Collector, placed reliance on the decision of the Govt.
of India in the case of M/s. Deokishan Damani and the decision of this Tribunal in ED(SB) Appeal No. 232 of 82(D) (Order No. 418-D/1983 dated July, 1983) (date not given in the copy furnished). But the Collector had rejected the applicability of the said decisions on the ground that they dealt with cotton fabrics whereas the goods in question were man-made fabrics.
4. Shri Gopal Prasad contended that in the face of the decisions cited (one of the Govt. of India and the other of this Tribunal) in both of which it had been held that hydro-extraction which takes the moisture from the fabrics cannot be said to be a process, the decision of the Collector was patently wrong. He contended that the distinction that the Collector drew on the ground that the said two decisions dealt with cotton fabrics whereas the subject goods were man-made fabrics, would not be a proper ground for refusing to follow the ratio of the said decisions.
5. Shri Tayal, however, contended that the said two decisions related to the applicability of Notification No. 80/76, dated 16-3-76 and that the said decisions would not, therefore, strictly apply to the present case involving the applicability of Notification No. 79/82. He pointed out that whereas Notification No. 80/76 dealt with goods subjected to "finishing processes" specified in Column 2 of the Table annexed to the notification, the present Notification No. 79/82 dealt with man-made fabrics processed with the aid of machine operated without the aid of power, etc. The distinction he sought to draw was that while hydro-extraction may not be a finishing process as required under Notification No. 80/76 it would yet be a process or at least part of a process as would fall for consideration in the present case This distinction appears to us to be well-founded. What would be a process in general need not necessarily be a finishing process. Therefore, the reliance on the two decisions cited for the appellants may not be wholly justified.
6. On the Other hand' Shri Tayal Pointed out that the decision in Metro Readywear Company v. Collector of Customs (1978 ELT J 520 Kerala) would be applicable to the facts of the present case. In that case it was held that the process of ironing, applied to the stitched brassiers prior to the packing was a process incidental to the completion of the brassiers as a manufactured product since the said process was obviously intended to give a finishing touch, in order to render the brassiers marketable as ready to wear under garments.
7. In the present instance what was being carried out by the appellants was the process of bleaching and dyeing. There can be no doubt that drying the cloth after dyeing was also part of the process involved, since without drying the cloth could not be removed for delivery to the customer If the drying had been done manually or by merely being hung out for drying no power would have been used in that process. But, admittedly, the appellants had carried out the process of drying (hydro-extraction) with the use of power Such drying was part of the process of bleaching and dyeing. Even though power may not have been used up to that stage, the use of power in the process of hydro-extraction would make the process of dyeing and bleaching carried out by the appellants one with the use of power, since the process of hvdroextraction would at least be a process incidental and ancillary to the completion of the manufactured product i.e., the bleached and dyed product.
8. Therefore, though the reasons given by the Collector in his order do not appear to us to be proper, we uphold his final conclusion for the reason mentioned above.
10. I have not been able to persuade myself into agreeing with the order proposed by Brother Raghavachari in which Brother IJ. Rao has concurred. I record my reasons for dissenting with the orders proposed by Brothers Raghavachari and IJ. Rao.
11. A process in order to be taxable under the Excise law must fulfil the requirement of definition of manufacture under section 2-F of the Central Excises and Salt Act, 1944, i.e. it should be a process incidental or ancillary to the completion of a manufactured product.
There is nothing on record to show the contribution made by Hydro-extraction process in the manufacture of man-made fabrics.
Besides the two decisions (i) that of Central Board of Excise and Customs in the case of Messrs Deokishan Damani and (ii) that of the Tribunal m Smt. Pushpa Khanna v. Collector of Central Excise, Bombay H, to which my learned brothers have referred in para 3 of their order holding that hydro-extraction process is not a process of manufacture regarding cotton fabrics, I notice that the Assistant Collector in his order dated 25th July, 1983 about the process observed as follows : "Hydro-extraction which is only a process of removing water/moisture from the fabrics does not impart any change in characteristics, texture etc on the fabrics It cannot be described as a finishing process what to say of manufacturing process." The Collector of Central Excise, Bombay, in his order dated 17-9-84 had nothing to comment about this finding but set aside the order of the Assistant Collector relying on use of hydro-extraction as a process in Notification No. 297/79. I fail to see how Notification No. 297/79 could be used for interpreting Notification No. 79/82. Even my learned brothers have not made use of this notification for concluding that hydro-extraction is a process of manufacture. In the absence of requisite material on record as to the role played by hydro-extraction in the process of bleaching and dyeing and looking to the categorical finding of the Assistant Collector in his order about the process, on my own I am not prepared to conclude that it is a process incidental or ancillary to the completion of a manufactured product and would attract tax liability.
12. As for Shri Tayal's reliance on Metro Readywear Co. v. Collector of Customs 1978 ELT (J 520), I notice that the decision holding the process of ironing to be a process of manufacture was given on the peculiar language of Tariff Item No. 22-D and on the reasoning that the process was intended to give a finishing touch to the brassiers to render them marketable. That decision would not help the Department in the present case.
13. The sheet anchor of the Department's case as set out in the show cause notice was Notification No. 297/79, dated 24-11-79. If for the reasons aforesaid the same is excluded from consideration, the case does not survive against the appellants.
14. I am not entering into the question whether after the Assistant Collector had approved the appellant's classification list in terms of Notification No. 79/82, dated 28-2-82 (even when Notification No.297/79 was in force) the Superintendent, Central Excise, without the approval of the classification list having been challenged before some superior authority and without any change in law or tariff item or fresh facts having been discovered, could have issued show cause notice relying on the Notification No. 297/79, dated 24-11-79 proposing to revise the classification list approved by a superior officer because this aspect of the matter has not been argued by the appellants.
15. For the foregoing reasons I would hold that it is not established that the process of hydro-extraction is a process of manufacture within the meaning of Section 2F of the Central Excises and Salt Act, 1944. I would, therefore, allow the appeal.
In accordance with the decision of the majority of the Members, the appeal is dismissed.