1. On a visit to the factory premises of the appellants, M/s.
Satyanarayan Manohar Lal, on 15-1-1975, Central Excise Officers found that the appellants had been water proofing cotton fabrics manually by application of a soultion of paraffin wax, resin and other pigments but that they had not obtained Central Excise licence therefor. 12,155 metres of canvas cloth falling under Tariff Item 19-(1) as well as 7,456 metres of Ded Suti fabrics falling under Tariff Item 19-(2) were detained and seized. A verification of the Accounts book showed earlier clearance and disposal of other quantities of similar goods. On issue of showcause notice, and after adjudication, the Collector of Central Excise, Kanpur under order dated 1-1-1979 held that the fabrics falling under Tariff Item 19-(1) are not liable to duty as the process had been done without the aid of power or steam, but that so far as fabrics falling under Tariff Item 19-(2), they were liable for duty at the concessional rate of 25 paise per sq. metre under notification No.88/69 as amended. He held that as the water proofing/wax proofing was a process applied to the fabrics, and as the processed fabric had been cleared without excise formalities, the charge against the appellants had been established. He therefore demanded duty amounting to Rs. 4,387.93 ps. and also confiscated the goods, fixing a redemption fine of Rs. 7,000/-. He imposed a penalty of Rs. 10,000/ On appeal the Central Board upheld the findings of the Collector but reduced the penalty as well as fine to Rs. 5,000/ each. The revision to the government against the said order has been received on transfer and is being disposed of as an appeal under this order.
2. We have heard Shri P.N. Awasthi, Advocate, for the appellants and Shri K.D. Tayaly Senior Departmental Representative, for the respondent.
3. Shri Awasthi placed reliance on the judgment reported in 1975 CENCUS page 90 to contend that there had been no manufacture involved in the activity carried on by the appellants and that the Collector was misled by the terms of the notification referred to by him and that, in any event, there was no case for imposition of penalty or confiscation. But Shri Tayal points out that the provisions of Section 2(f) of the Central Excises and Salt Act have been amended under Act 6 of 1980 whereunder Sub-clause (v) of Section 2(0 has been introduced as follows : "(v) in relation to goods comprised in Item No. 19-Iof the First Schedule, includes bleaching, mercerising, dyeing, printing, waterproofing, rubberising, shrinkproofing, organdie processing or any other process/or any one or more of these processes." He therefore contends that after the said amendment the decision relied on by Shri Awasthi would be of no effect. He further points out that in New Shakti Dyeing Works Pvt. Ltd. and Am. v. Union of India (1983 E.L.T. 1736 Bombay) the Bombay High Court had considered the earlier decisions (on the question of processing amounting to manufacture) and had also considered the effect of the amendment abovenoted had held that under the above amendment, as also on first principles, the process of bleaching, dyeing or printing brought into existence a new marketable commodity different from the grey cloth handed over to the processors and thus these processes amonted to manufacture.
4. Under Section 5 of Act 6 of 1980 every Central Act as in force at any time during the period commencing with the appointed day and ending with the day immediately preceding the date of commencement of that Act (24-11-1979) and providing for or relating to levy of duties of excise on cloth, cotton cloth, cotton fabrics etc. shall have and shall be deemed to have always had effect during the said period as if such cloth, cotton cloth or cotton fabrics comprised (for the purposes of the duty leviable under that Act) a Sub-item covering such cloth, cotton cloth or cotton fabrics not Subjected to any process mentioned in Sub-clause (v) or of clause (f) of Section 2 of the Central Excises and Salt Act as amended by that Act and a Sub-item covering such cloth, cotton cloth or cotton fabrics Subjected to any such process or any two or more such processes. Therefore by virtue of the said amendment the definition of manufacture as introduced in Section 2(f)(v) would apply to the periods prior to 24-11-1979 also, inclusive of the period relevant for the present case.
5. In that event, the process carried out by the appellants would amount to manufacture as defined in Section 2(f). Therefore the orders of the lower authorities, holding that the appellants had offended the provisions of the Central Excises and Salt Act, are proper. Duty has also been therefore rightly demanded.
6. But Shri Awasthi has further contended that in any event there was no case for imposition of penalty or ordering of confiscation with a right of redemption. We take into consideration the fact that we have held duty to be payable on the basis of the retrospective amendment of Section 2(f) under Act 6 of 1980. Having this consideration in mind, we feel that the imposition of penalty and the order for confiscation were not called for. Accordingly, we set aside the portion of the order under which penalty had been imposed and confiscation had been ordered.
7. In the result, the appeal is allowed to the extent of setting aside the order of the lower authorities with reference to imposition of penalty and confiscation, but dismissed in other respects.