M/S Nhh Textile Processors vs Commissioner, Central Excise & Service ...

Appeal No.E/927/2007 [Arising out of OIA No.187 to 188/2007, dt.30.04.2007, passed by Commissioner (Appeals), Central Excise & Customs, Ahmedabad]

M/s Nhh Textile Processors Appellant

Vs

Commissioner, Central Excise & Service Tax, Ahmedabad-I Respondent

Represented by:

For Appellant: Shri Uday Joshi, Advocate For Respondent: Shri Alok Srivastava, Authorised Representative

For approval and signature:

Honble Mr. P.K. Das, Member (Judicial) Honble Mr. H.K. Thakur, Member (Technical)

1. Whether Press Reporters may be allowed to see the No Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy of Seen the order?

4. Whether order is to be circulated to the Departmental Yes authorities?

CORAM:

HONBLE MR. P.K. DAS, MEMBER (JUDICIAL) HONBLE MR. H.K. THAKUR, MEMBER (TECHNICAL)

Date of Hearing/Decision: 30.04.2015

Order No. A/10502 / 2015, dt.30.04.2015

Per: H.K. Thakur

1. This appeal has been filed by M/s Nhh Textile Processors, Ahmedabad with respect to OIA No.187 to 188/2007, dt.30.04.2007.

2. Shri Uday Joshi, learned Advocate appearing on behalf of the Appellant argued that this is a second round of litigation and in the first round of litigation as per Order No.A/1590/WZB/2000/C-I(EB), dt.07.08.2006, this matter was remanded back to the Adjudicating Authority with directions to decide whether processes of Chemiking and Spotting undertaken by the Appellant amount to manufacture or not. The learned Advocate made the Bench go through the earlier order dt.07.08.2006 passed by this Bench. The learned Advocate also relied upon the following case-laws, to argue that the processes of Chemiking and Spotting does not amount to manufacture:-

i) T.D. Bhatia Vs CCE., Mumbai [2004 (173) ELT 249 (Tri-Mum)]

ii) CCE, Coimbatore Vs K.G. Denim Ltd [2006 (205) ELT 957 ((Tri-Bang)]

3. It was the case of the Appellant that the process undertaken by the Appellant is only washing which does not amount to manufacture under Section 2(f) of the Central Excise Act, 1944 as no distinct marketable commodity comes into existence.

4. Shri Alok Srivastava, Authorised Representative appearing on behalf of the Revenue argued that activities undertaken by the Appellant and M/s Nhh Textile Processors does not convey that simple washing of the fabrics was done and that Appellants are involved in complete process of Dyeing of man-made fabrics. He made the Bench go through Para 8 of the OIO dt.07.02.2007 passed by the Adjudicating Authority, which has been upheld by the First Appellate Authority.

5. Heard both the sides and perused the case records. The issue involved in the present proceedings is whether the processes of Chemiking and Spotting undertaken by the Appellant amounts to manufacture under Section 2(f) of the Central Excise Act, 1944 or not. As per the order dt.07.08.2006 passed by this Tribunal in Appeal No.E/1666/2006, following order was passed in the case of appellant while remanding the issue to the adjudicating authority:-

The appellants were undertaking the processing of Spotting, Chemiking and washing if processed fabrics on job work basis which were received from their principal manufacturer under Rule 4(5)(a) of CENVAT Credit Rules, 2002 procedure. Their main contention is that the said process does not amount to manufacture and therefore, no duty liability can be fastened on them and cited the decision of the Tribunal in the case of T.D. Bhatia Vs Commissioner of Central Excise, Mumbai  2004 (173) ELT 249 (Tri-Mum) holding that the process of washing does not amount to manufacture. When the learned Advocate was asked to explain the process of chemiking and spotting, he stated that it is a process of simple washing and nothing more than that. However, it was admitted that these processes were not explained before the lower adjudicating authorities. We find that the process of the chemiking and spotting were not explained by them to the lower adjudicating authority and these being question of facts, a final view can be taken only when the process are properly explained, when lower authorities have specifically held them to be manufacturing processes.

2. We accordingly allow the stay petition and remand the matter back to the lower Adjudicating authority with a direction that he should give a clear finding explaining the process of spotting and chemiking undertaken by the appellants and after taking into account the submissions made by the appellants to pass a reasoned order thereafter. Appeal is allowed by way of remand.

5.1 While remanding the case back to the Adjudicating Authority, the only question required to be decided was whether the processes of Chemiking and Spotting undertaken by the Appellant would amount to manufacture or not.

6. The learned Adjudicating Authority, while deciding the issue, made the following observations in OIO dt.07.02.2007:-

8. I find that Note 4 to Chapter 55 of the Central Excise Tariff Act, 1985, specifically stipulates that in relation to products of Heading Nos.55.11, 55.12, 55.13 and 55.14, bleaching, dyeing, printing, shrink-proofing, tentering, heal-setting, crease-resistant processing or any other processes or any one or more of these processes, shall amount to manufacture. I further find that Partner of the noticee has admitted during the course of hearing that they are doing the processes of spotting and chemiking by applying some chemicals, soap, detergent. It is on record that after completion of spotting and chemiking process on the semi finished fabric received from M/s M.H. Mills, it was cleared back to M/s M.H. Mills and was subjected to further processes there. I find no reason as to why the washing of the fabrics which was necessary to remove the stain and dust from the fabrics before the fabrics can be dyed properly should be looked at separately from the next stage of dyeing. The activity of dyeing consisted of two stages. The first stage was that of washing of the fabrics and the second stage was the dyeing of the washed fabrics.

Before the fabrics could be dyed properly, it was necessary to wash the same. In net effect, the noticee undertakes the process of dyeing of the man-made fabrics. In the circumstances, it would not be appropriate to look at the two stages involved in the activity of dyeing of man-made fabrics separately. The entire activity has to be seen as a whole and come to a decision on that basis whether the activity in which the noticee was engaged amounts to manufacture or otherwise. In this context, I rely upon the judgment of Tribunal rendered in the case of Verma Industrials Ltd., Bangalore Vs Collector of Central Excise [1984 (18) ELT 403] wherein it was held that manufacture includes any process incidental or ancillary to the completion of a manufactured product, and in relation to goods compared in item No.22(1) of the First Schedule includes bleaching, dyeing, printing, shrink-proofing, tentering, heat-setting, crease resistant processing or any other process of spotting and chemiking of the fabrics does not amount to process of manufacture is of no relevance in the instant case as the present case is not a case of washing simpliciter but is a case where the respondents aaaaaaaaare admittedly involved in the complete process of dyeing of man-made fabrics.

A similar view has also been given by the Tribunal in case of CCE Vs S.S. Mehra & Co. reported at 1992 (62) ELT 456 (Tribunal).

6.1 It is observed from the findings of the Adjudicating Authority that the fabrics are received by M/s Nhh Textile Processors and after undertaking the processes of Chemiking and Spotting, the goods are sent back to M.H Mills and subject to further dyeing. The learned Adjudicating Authority held that the dying is consisting of two processes. The first process was that of washing of the fabrics which is done by the Appellant before the fabrics could be dyed by the supplier of fabrics M/s M.H. Mills. It was his finding that the two stages of washing and dyeing, involved in the process of processing of the fabrics, cannot be viewed separately. It was, accordingly, held that the processes of Chemiking and Spotting has to be considered as complete process of dyeing of man made fabrics. In this regard, we are of the considered opinion that the processes undertaken by the Appellant have to be seen in isolation whether the same amounts to manufacture or not. The processes undertaken before the fabrics are received in the Appellants premises and the processes undertaken by M/s M.H. Mills Textile Processors after receipt of the processed fabrics from the Appellant, are not relevant for the purpose of deciding whether the processes undertaken by the Appellant amounts to manufacture or not. This line of argument that the processes undertaken both by the Appellant and M/s M.H. Mills have to be taken together is not legally correct and is required to be rejected.

7. From the facts available on record, it is observed that the Appellant is only undertaking the process of Chemiking and Spotting which is akin to the process of washing and cannot be considered to have brought a new marketable product into existence which is brought and sold in the market. So far as the process of washing amounting to manufacture is concerned, the CESTAT Mumbai in the case of T.D. Bhatia Vs CCE Mumbai (supra) held as follows:-

3.?According to the department, the product became ready for specific use for ladies only after the process carried, out by the appellants and was therefore leviable to duty as wadding of man-made fabric under CETA sub-heading 5601.22. The Commissioner (Appeals) has relied upon Note 4 to Chapter 60 of the schedule to the CETA, 1985, which states that in relation to the products referred to in this Chapter, bleaching, mercerising, dyeing, printing, water-proofing, shrink-proofing, tentering, hear-setting, crease-resistant, organdie processing or any other process or any one or more of these process shall amount to manufacture and has yet classified the product in dispute under Chapter Heading 56.01. It is to be noted that washing is not a process of manufacture even as per the above note. Be that as it may, we have to first determine whether the processes carried out by the appellants amount to manufacture and only if the answer is in the positive, does the question of classification arise. The product in question is a washable cover for women of the lower strata, who use home made sanitary napkins, as they cannot afford to purchase sanitary napkins. The cover can be washed up to 90 times as seen, from the packing of the cover. The inherent characteristic of the product namely, absorbency, remained the same even after washing, drying, folding and packing. Hence, no new product comes into existence. Even without putting the acrylic knitted fabric in a printed polythene bag, it can be used for the same purpose i.e. as a cover for sanitary napkin.

7.1 In the case of CCE, Coimbatore Vs K.G. Denim Ltd (supra) also, it was held that every process undertaken on the fabrics will not go into the category of any other process as mentioned in Note 2 of the Chapter 52 of the Central Excise Tariff Act, 1985.

8. In view of the settled proposition of law and the observations made above, the processes of Chemiking and Spotting undertaken by the Appellant does not amount to manufacture and accordingly, the appeal filed by the Appellant is allowed.

(Operative portion of the order pronounced in Court)

(P.K. Das) (H.K. Thakur) Member (Judicial) Member (Technical)

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