ORDER
V.P. Gulati, Member (T)
1. This reference application arises out of the order of the Tribunal bearing No. 704/1995, dated 27-11-1995. The Tribunal has adopted the reasoning of the Collector (Appeals) as set out in para 4 of the order. The learned Collector has held that duty was not demandable in respect of the goods which had been earlier allowed clearance duty free and which permission later on was found to have been erroneously given and was not in order.
2. The learned DR for the department pleaded that the facility under Rule 96D of the Central Excise Rules, 1944 is available only where fabrics have to be subjected to process as recognized under Central Excise Law. He pleaded that the respondents are laminating non-woven fabrics and this is not one of the processes coming under the definition of process as per the chapter notes under chapters 52, 54 and 55. He pleaded that lamination is not set out as one of the process and therefore, permission under Rule 96D is not applicable in respect of these fabrics. He pleaded that since permission was given erroneously earlier which was later withdrawn, the department can raise the demand for the past period of six months from the date of withdrawal of the concession. He pleaded that the Hon’ble Supreme Court in a number of cases has held that duty demand for the past period which otherwise is demandable can be raised consequent on the change in classification etc. He pleaded that the same ratio would apply in this case since the goods had been cleared without payment of duty under a particular rule. He therefore, prayed for referring the questions to the Hon’ble High Court:
Whether under Rule 96D fabrics could have been allowed permission to be removed without payment of duty for the purpose of lamination of the fabrics.
He pleaded that term process used in Rule 96D can be taken to cover only process as set out under tariff Notes 52, 54 and 55. He pleaded that as it is, the respondents’ goods fall under tariff 56 which is a separate tariff entry. He pleaded that the concesison under Rule 96D on the fabrics would be depending on the headings under which base fabrics falls.
3. Shri S. Muruganentham, Manager appearing for the respondents pleaded that permission had been rightly accorded under Rule 96D and the process can be taken to be process as covered by Rule 96D. Therefore, no question of law arises for reference to the High Court.
4. We have considered pleas made by both the sides. Rule 96D is reproduced below for convenience of reference:
96D. Procedure for removal of cotton fabrics or jute manufactures, or man made fabrics from one factory to another without payment of duty for processing. – (1) Cotton fabrics or jute manufactures or man-made fabrics may be removed without payment of duty from one factory to another factory including a processing factory for the purpose of processing, subject to observance of the procedure hereinafter prescribed.
(2) For the purpose of this rule, ‘processing factory’ shall be deemed to be a factory working with the aid of power in which cotton fabrics or jute manufactures or man-made fabrics are processed but in which such fabrics or manufactures are not woven.
(3) When cotton fabrics or jute manufactures or man-made fabrics are removed from the factory where they are manufactured to another factory including a processing factory, the consignor shall follow the procedure as required by Rules 156A and 156B as modified by Rule 173N.
(4) If cotton fabrics or jute manufactures or man-made fabrics, after being processed, are cleared for home consumption from the factory including a processing factory, the duty payable at the time of such clearance and such other dues that may be payable in respect of such goods may be paid either by the owner of the processing factory or by the owner of the originating factory.
(5) If cotton fabrics or jute manufactures or man-made fabrics, after being processed, are removed without payment of duty to one or more factories for the purposes of further processing, or to the originating factory, such removal, shall be subject to and, in accordance with the provisions of Sub-rule (3).
(6) Notwithstanding anything contained in these rules, the duty referred to in this rule shall, in case of cotton fabrics where manufacturers are availing of procedure prescribed in Rule 49A, include the duty payable on cellulosic spun yarn falling under Heading No. 55.05 and cotton yarn falling under Heading No. 52.03 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) plus the interest at the rate of three per cent thereof.
We observe that under this rule, fabrics can be allowed free clearance provided these are intended for being processed in another factory of the manufacturer. The question that arises for consideration is what is the scope of the term process of fabrics in the context of Rule 96D. We observe that so far as definition of manufacture under Rule 2(f) is concerned, unlike earlier, there is no specific definition specifically in the context of fabrics and what is to be considered as process of manufacture. There is no definition given under Rule 96D also as to what is to be considered as process in the context of fabrics under this rule. It is only under the tariff the scope of process to be carried out in the context of fabrics falling under Chapters 52, 54 and 55 is set out. It is seen that the process mentioned relates to specific products falling under certain headings and the processes which have to be considered as process or for the manufacture is amplified with the words “or for other process or one of more of these processes”. The scope of the term, process, therefore, for the purpose of classification for levy of duty has been given extended meaning to the term manufacture. The term process for Rule 96D of Central Excise Rules therefore has to be considered in the context of the scheme of the tariff for different categories of fabrics process. Therefore, for the purpose of Rule 96D, the process set out under chapter notes under heading as above will have to be read with the rule. For each tariff heading the process have been separately spelt out it has therefore to be held that these process have to be such that by carrying out the same the fabrics continue to fall under the same chapter tariff heading. The contention of the Revenue is that by the processes carried out a different product emerges and therefore, the base fabrics could not have been removed without payment of duty.
5. The learned DR has also cited the ruling of the Tribunal reported in 1991 (35) ECR 22. In view of the above discussion, it appears that a question of law would arise as to the scope of the term process as set out under Rule 96D. We, therefore, refer the following question to the Hon’ble High Court:
Whether in the facts and circumstances of the case, base fabrics which has been removed for lamination could have been removed without payment of duty in terms of Rule 96D of Central Excise Rules, 1944?