1. The point of dispute in this case is whether bed-sheets etc. made out of duty-paid dyed/printed cotton fabrics in running length should have to pay differential duty under Item 19 of the Central Excise Tariff.
2. The facts of the case in brief are that the appellants buy duty-paid dyed/printed cotton cloth in running length (sheeting) from their sister concern located adjacent to their factory. They cut the cloth into pieces of required length and then hem and stitch the four sides of those pieces. The pieces thereupon assume the form of bed-sheets, bed-covers, pillow covers, table linen etc. The appellants market them under their brand name 'BICHHONA'. There is no dispute about pillow covers. The appellants are paying duty thereon under the residuary Item 68 of the Tariff. The dispute in this appeal is about the remaining items only.
3. Before going into the nature of the dispute in detail, it would be helpful to notice the material portions of Tariff Item No. 19 :- "Cotton fabrics" means all varieties of fabrics manufactured either wholly or partly from cotton and includes dhoties, sarees, chaddars, bed-sheets, bed-spreads, counter-panes, table-cloths...
(b) cotton fabrics, subjected to the process of bleaching, mercerising, dyeing, printing, water-proofing, rubberising, shrink proofing, organdie processing or any other process or any two or more of these processes." 4. The appellants submitted a classification list effective from 4-4-1984 for approval of the Central Excise authorities. In the said classification list, they listed the following four items as not liable to duty :- The authorities did not agree. After adjudication of the matter, the Assistant Collector held, and later the Collector (Appeals) confirmed it, that the processes of cutting, hemming and stitching undertaken by the appellants amounted to manufacture, that bed-sheets etc.
manufactured by them were a new and distinct item from the cloth in running length out of which they were manufactured, that bed-sheets etc. were specified by name as a separate product in the definition of Tariff Item No. 19 and that, therefore, the appellants would have to pay duty on the articles manufactured by them under Item 19-I(b) of the Tariff. However, the lower authorities extended the benefit of proforma credit under Rule 56-A of the Central Excise Rules, 1944 to the appellants. This meant that the appellants could take credit for the duty already paid on the cloth in running length so that in effect they had to pay only the net differential duty corresponding to the value added on the new articles. The appellants are in appeal against this order.
5. At the time of the hearing before us, the appellants first showed us samples of the dyed/printed cloth in running length and of the bed-sheets, bed-covers and pillow covers made out of them. Thereafter, they pressed for the following pleas before us :- (1) The entry "bed-sheets" occurring in the definition part of Tariff Item 19 referred to the quality of the cloth produced in the generally accepted name and not to the made up pieces of bed-sheets, bed-spreads, etc., after cutting, stitching and other fabrication.
[Reliance on the Division Bench judgment of the Delhi High Court in the case of Dayal Weaving Factory, Panipat v. U.O.I.-Civil Writ No. 346 of 1969 decided on 12-8-1970].
(2) The expression "bed-sheets" etc. occurred only in the main portion of the Tariff definition but there was no rate of duty specified against the main definition. The rates were specified only against sub-items of the Tariff entry but the expression "bed-sheets" etc. were not specified in the sub-items. In the absence of rate of duty against the main definition, there could be no charge of duty on bed-sheets etc.
[Reliance on 1979 E.L.T. J. 608 (Bom.)-Shri Vallabh Glass Works Ltd. and Anr. v. U.O.I. and others].
(3) No evidence had been produced by the Department to show that the textile trade regarded the processes of cutting, hemming and stitching as manufacturing processes.
(4) Taking us to the history of evolution of Tariff Item No. 19, the appellants contended that no reliance could be placed on the retrospective amendments made to the Tariff entry as well as to Section 2(f)(v) of the Central Excises and Salt Act, 1944 .by the Central Excises and Salt and Additional Duties of Excise (Amendment) Act, 1980 as the stated object of this amending Act was only to cure the defects found by the Gujarat High Court in relation to processing of cotton fabrics.
(5) Reading Item 19-I(b) of the Tariff along with Section 2(f)(v) of the Act, and applying the principle of Ejusdem Generis, it was clear that the words "any other process" occurring in the entry could refer only to unspecified processes which were in the nature of textile finishing processes, and not to the processes of cutting, hemming and stitching.
(6) The Central Board of Excise and Customs, through their Tariff Advices of 1980 and 1983, had advised the Collectors that towels and blankets (which too were made by cutting and stitching from fabrics in length) fell under Item 19 of the Tariff but they were liable to only one stage duty under that item. These Tariff Advices should be regarded as authoritative pronouncements by the taxing authority and, by applying the principle of contemporanea expositio, they should be held to apply mutatis mutandis to bed-sheets etc. also.
The appellants accepted that their bed-sheets, bed-covers and table linen fell under Item 19 but they contended that these articles could not be subjected to duty again [the cloth in running length having already borne duty under Item 19-Kb)], under Item 19-I(b) unless such bed-sheets etc. had been subjected to another process specified in Item 19-I(b).
6. The Department's representative relied on the recent Supreme Court judgment reported at 1985 (20) E.L.T. 179 (SC) (Empire Industries Ltd. and others v. U.O.I. and others, and U.O.I. and others v. Messrs Real Honest Textiles) wherein it had been held that it was a question of degree whether the process undertaken had resulted in transformation of the material into a new product. She reiterated the finding of the lower authorities that sheeting cloth in running length was different from bed-sheets. The cloth in running length could not be used as a bed-sheet. She contested the argument of the appellants that the articles specifically named in the tariff definition, like bed-sheets, referred to quality of cotton fabrics. She stated that the articles named were distinct commercial products known and used as such. She also contested the appellants' plea that the residual words "any other process" in Item 19-I(b) and Section 2(f)(v) were limited to a process of textile finishing only and stated that there was no authority for such a restrictive view. The words "any other process" were very wide and they ought to take their natural meaning.
7. We have given our earnest consideration to the matter. Bed-sheets, bed-covers, table-cloths etc. are articles of daily use in practically every household. No expertise is required to say that bed-sheets and bed-covers etc. are different from fabrics in running length. The fabrics in running length cannot be used as bed-sheets or bed-covers or table-cloths. Nor are the fabrics in length known as bed-sheets, bed-covers or table-cloths. The cloth must be cut to required size and then hemmed and stitched ; only then it assumes the shape of bed-sheets, bed-covers, table-cloths etc. The appellants have relied on the Delhi High Court judgment in the case of Dayal Weaving Factory (Civil Writ No. 346 of 1969 decided on 12-8-1970). We find no pronouncement in the said judgment to the effect that sheeting cloth in running length was the same thing as bed-sheets. The facts of that case as well as the Tariff entry at that time were different. Item 19-I was at that time divided into the following two sub-items :- "19.I. Cotton fabrics other than (i) embroidery in the piece, in strips or in motifs, and (ii) fabrics impregnated or coated with preparations of cellulose derivatives or other artificial plastic materials- (1) Coating, suiting, tussors, corduroy, gaberdine, bed-ford, satin, denim, lappet, lace, knitted fabric, tapestry, furnishing fabric including jacquard curtain cloth, gadlaped, mattress fabric, terry towel including turkish towel, terry towelling cloth including turkish towelling cloth, blanket, canvas, duck, filter cloth, tracing cloth and bukram cloth.
The petitioners in that case were manufacturers of bed-sheets on powerlooms. They had been paying a nominal duty determined on the basis of a compounded rate per loom per shift. As part of the budgetary proposals of 1969, the Finance Bill of 1969 withdrew the compounded levy procedure in respect of the varieties of cotton fabrics falling under Item 19-1(1). The appellants filed the writ petition complaining that the Finance Bill had increased their duty liability from Rs. 100/- per year to Rs. 60,000/- per year which amounted to confiscation of property Their plea was dismissed by the High Court. The petitioners in that case had also raised the subsidiary plea of discrimination saying that the new tariff fixed no norms for distinguishing one variety of fabric from the other in Item 19-I(1). This plea too was dismissed by the High Court. We reproduce below the relevant paragraph from the High Court judgment :- "A subsidiary argument of discrimination is that the amended provision gave arbitrary power to the taxing authority to make arbitrary discrimination without affording any guidelines and as an example it is stated that units which are manufacturing bed sheets are exempted from the imposition of the aforesaid tax but units which manufactured bed-covers and tapestry are subject to the aforesaid tax and there are not standards laid dawn by which the taxing authority could effect a distinction between bed covers and bed sheets or fabrics meant for bed-sheets and tapestry. This argument appears to us to be entirely misconceived. Entry 19-I relates to cotton fabrics and varying duties of excise are leviable according to the class in which a particular cotton fabric falls.
Entry 19(I)(1) covers, inter alia tapestry and other furnishing fabrics including jacquard curtain cloth. Entry 19(I)(2) covers other cotton fabrics depending upon the count of yarn employed for its production. We fail to see how bed-sheets are exempted while bed covers are not. If the product is tapestry or furnishing fabric including jacquard curtain cloth, be it used by the customer as a bed-sheet or bed-cover, it will attract the excise duty under entry 19(I)(1). In fact, bed-sheets are specifically included in the definition of cotton fabrics in the opening part of entry 19. Entry 19 refers to the quality of the cloth produced in the generally accepted name which is given to such cloth and it has no relation to the ultimate shape, that may be given to such cloth or the use to which it may be put by the ultimate consumer. We, therefore, do not see any scope for factual discrimination at the hands of the taxing authority and this argument must also fail." Keeping in mind the context of the points of dispute in the said writ petition, it is quite clear that when their Lordships of the Delhi High Court were referring to the quality of the cloth, they meant the popular meaning given to the cloth in the shape it was at the time of clearance. The question whether bed-sheets were the same thing as cloth in running length was neither placed before the High Court nor did the High Court come to any finding on this question even by way of an obiter.
8. The appellants have laid great stress on their plea that no rate of duty is specified against bed-sheets, bed-covers, table-cloths etc.
However, we find that it is not so. As would be seen from the wording of the tariff entry reproduced in paragraph 3 above, Item 19 contains an extended definition because of the inclusive clause therein.
Articles like bed-sheets, bedcovers, table-cloths etc., though considered made-up articles in common parlance, have, for the purpose of tariff entry, been deemed to be cotton fabrics. This definition of "cotton fabrics" occurs in the main item at the beginning of the entry.
The item is thereafter divided into sub-items for the purpose of fixing varying rates for different varieties, But the point is that wherever the expression "cotton fabrics" occurs in the sub-items, it would have the same extended meaning as given to this expression in the entry at the beginning. It is not necessary to reproduce the entire definition with the inclusive clause in each of the sub-items once again. If such a repetition were to be done, the definition in the main entry would be rendered redundant or nugatory. There is no dispute that the definition of cotton fabrics includes bed-sheets etc. Thus, when Item 19-I(b) of the present tariff speaks of "cotton fabrics", the said expression would include bed-sheets etc. also. Since, on the appellants' own showing, their bed-sheets etc. were of the dyed/printed variety, i.e.
the processed variety, they would squarely fall under Item 19-I(b). The reliance placed by the appellants on the Bombay High Court judgment in the case of Vallabh Glass Works [1979 E.L.T. J. 608 (Bom.)] is misplaced for the simple reason that tariff item No. 23-A involved in that case was structured differently. There, while the heading of the entry read as "Glass and glassware", the four sub-items thereunder contained only some named varieties of glassware. In such a situation, it could be said that there was no rate fixed for a variety of glass and glassware not named in any of the sub-items. The situation is quite different in the case of tariff item 19. Here, the sub-items relate to "cotton fabrics" as a whole-; the rates in different sub-items differ on the basis of the nature of, or lack of, processing done on the fabrics. Thus, bed-sheets etc. made of grey cloth would fall in Item 19-I(a) while those made from bleached, dyed and printed cloth would fall under Item 19-I(b).
Before concluding the discussion on this point, it would be interesting to state here that it was the appellants' own submission before the Assistant Collector that their bed-sheets etc. fell under Item 19-I(b).
We quote from the record of personal hearing held on 24-7-1984 before the Assistant Collector:- "It was contended on behalf of the manufacturers that the goods which are classifiable under T.I. 68 would be subjected to duty under that T.I. but in the case of bed-sheet, napkins, bed-covers, table-cloths, the goods will remain under Item 19-I(b) under which the processed fabrics from which they are made were classifiable." The appellants reiterated this in paragraph 2 of their written appeal memorandum submitted to the Collector (Appeals). We quote :- "They stated that at fabric stage the goods had already paid duty under Tariff Item 19-I(b) and that the same classification continues even after the conversion of the fabric into bed-sheets, bed-covers, napkins, etc. It was submitted that since the tariff item or sub-item had not changed, there was no ground for the Department to levy duty again on those products." 9. Coming to the point whether the processes undertaken by the appellants should be regarded as processes of 'manufacture' or not, we observe that by undertaking the processes of cutting, hemming and stitching, the appellants bring into existence new articles (bed-sheets, bed-spreads, tablecloths, etc.) which the Parliament has chosen to expressly specify as excisable goods in Tariff Item 19. The said processes have, therefore, to be regarded as processes of manufacture. A Division Bench of the Delhi High Court has held in the case of Hyderabad Asbestos Cement Products Ltd. and Anr. v. U.O.I. and Ors., [1980 E.L.T. 735 (Del.)) that if the Parliament has specifically included a particular product in the tariff schedule, its validity cannot be questioned on the ground that it did not involve any process amounting to manufacture and that if the legislature has treated a process of an article to be a 'manufacture', it is not open to contend that the process is not manufacture. More recently, the Hon'ble Supreme Court have observed in the case of Empire Industries Ltd. and Ors. v.U.O.I. and Ors., (Writ Petition Civil No. 11728 of 1984) and Union of India and Ors. v. Real Honest Textiles (Civil Appeals Nos. 586-92 of 1979) : 1985 (20) E.L.T. 179 (SC).): "The moment there is transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether be it the result of one process or several processes 'manufacture' takes place and liability to duty is attracted...Whatever may be the operation, it is the effect of the operation on the commodity that is material for the purpose of determining whether the operation constitutes such a process which will be part of 'manufacture'. Any process or processes creating something else having distinctive name, character and use would be manufacture." 10. Both the aforesaid judgments of the Delhi High Court and the Supreme Court were put to the appellants by the Bench during the hearing. The reply given by the appellants was that though the tariff entry named bed-sheets etc., no rate of duty was fixed for them. We have discussed this point in the preceding paragraph and found it to be devoid of merit. In the light of the authorities of the Delhi High Court and the Supreme Court quoted by us above, since the appellants' processes of cutting, hemming and stitching create new and distinct commercial products which are different from the cloth in running length, the said processes have to be regarded as processes of manufacture. This legal position was there under the tariff entry even before the amending Act of 1980 split up Item 19-I into two sub-items (a) and (b) on the basis of processing. Since the products manufactured by the appellants are bed-sheets, bed-spreads, table-cloths etc.-the articles specifically named in the tariff entry-and since they are of the dyed/printed variety, there is no need to go into the meaning of the expression "any other process" in Item 19-I(b) or in Section 2(f)(v). The reliance placed by the appellants on the principle of Ejusdem Generis is misplaced because no question of Ejusdem Generis arises here. No question of going into the historical evolution of tariff entry 19 arises also because, as already stated by us, bed-sheets etc. were named as a specific excisable article in the tariff entry before the amending Act of 1980 and they continue to be so named even thereafter. Since there is no ambiguity in the tariff entry so far as bed-sheets etc. are concerned, no question of contemporanea expositio also arises, nor could the two Tariff Advices of the Central Board of Excise and Customs be given the status of contemporanea expositio. In fact, the Tariff Advices related to towels and blankets-two different products which are not named in the tariff entry. The Advices were themselves issued long after the inclusion of bed-sheets etc. in the tariff entry.
11. Summing up, we find no merit in any of the arguments put forth by the appellants. In the result, we uphold the impugned orders and reject this appeal.