ORDER
V.K. Agrawal, Member (T)
1. The issues involved in this appeal, filed by M/s. Birla VXL Limited, are whether Dobby Cards are chargeable to Excise duty and whether the benefit of notification No. 67/95-C.E. is available to such Dobby Cards,
2. Shri R. Sudhinder, learned Advocate, submitted that the Appellants manufacture man-made as well as woollen fabrics; that they also manufacture yarn which is used in the manufacture of fabric; that the fabric woven from yarn has various designs and patterns on them; that in order to obtain the required design of the fabric the yarn is fed through an item known as Dobby card which is nothing but Myler Sheets; that Myler sheets are plastic sheets which are cut into required length and the holes are punched on the same on the basis of required design; that such punched Myler sheets are also referred as Dobby card in the trade; that this process of cutting and punching sheets would not amount to manufacture as the activity does not result it emergence of any new excisable item; that further Dobby cards are not standarised item which are generally bought and sold in the market as they are specific in design and are created for a specific purpose; that accordingly the Dobby cards are not chargeable to Excise duty. He, further, submitted that it is for the department to discharge the onus which has not been discharged by them nor the department has given any reason with supporting evidence to show that the dobby cards are different and distinct from Myler sheets. The learned Advocate alternatively submitted that if the product is held to be excisable they are eligible to the benefit of Notification No. 67/95-CE; that the said notification exempts capital goods and inputs when manufacture in a factory and consumed within the factory of production from payment of duty under Chapters 51 and 55; that as both the man-made fabric and woollen fabric have been notified as final product under the notification issued under Rule 57A the benefit of notification is available to them; that Dobby cards are used for both the fabrics falling under Chapter 55 and woollen fabric falling under Chapter 51. The benefit of notification cannot be denied on the ground that Chapter 55 is excluded from the purview of Notification 67/95; that nowhere it has been mentioned in the notification that the inputs should be used exclusively for the specified final product; that as the Dobby cards are used for specified products namely woollen fabrics falling under Chapter 51 as well for man-made fabric falling under Chapter 55 which is excluded from the list of final products, the benefit of Notification is available to them. Finally he submitted that if it is held that they are liable to pay the duty on Dobby cards the Modvat credit of the duty paid on inputs should be extended to them.
3. Countering the arguments Shri R.C. Sankhla, learned D.R., submitted that the process of cutting Myler sheets into size and punching holes thereon a new identifiable product comes into existence; that the purpose of punching holes is to obtain the required design of the fabric; that without the processes undertaken by the Appellants the design cannot be imprinted on the fabric; that Myler sheets as such cannot be used for the purpose of obtaining design on the fabric; that the dobby cards are distinct in name, character, and use; that the dobby cards can be used by any manufacturer and can be easily brought to the market for being bought and sold; that the mere fact that they are specific to a particular machine does not mean that they are non-marketable. He, further, submitted that notification No. 67/95 specifically excludes items falling under Chapter 55 of the Tariff from the benefit of the notification; that as the Appellants are manufacturing man-made fabric under Chapter 55 the benefit of notification is not available to them. He finally submitted that penalty is imposable on the Appellants as they never intimated manufacture and captive use of the Dobby cards.
4. We have considered the submissions of both the sides. We find substance in the submissions of learned SDR that the process undertaken by the Appellants on Myler sheets amounts to manufacture as a new and different article emerges namely Dobby card having a distinctive name, character or use. It has not been disputed by the Appellants that the purpose of punching hole on the Myler sheet is to make design on the fabric. The holes are punched according to the design required to be made on the fabric. The process undertaken by them satisfies the’ twofold test laid down by the Supreme Court in the case of U.O.I v. J.G. Glass Industries Ltd., 1998 (97) E.L.T. 5 (S.C.), for deciding whether the process is that of manufacture. We, therefore, hold that the process undertaken by them amounts to manufacture and as such Dobby cards are eligible to the Excise duty. We also find substance in the submission of the learned SDR that merely because the Dobby cards are to be used with a particular machine would not make them a non-marketable product. The second question involved in this appeal is whether they are eligible to avail of the exemption under Notification No. 67/95. This notification exempts capital goods as defined in Rule 57Q and inputs as specified in the table to the notification manufactured in a factory and used within the factory of production of final products specified in column 3 of the table annexed to the notification. As per column 3 of the table, Chapter 55 of the Schedule to the Central Excise Tariff Act is excluded from the purview of the final products. The Appellants have claimed benefit of the said notification contending that Dobby cards are used both for goods falling under Chapter 51 and Chapter 55 and in absence of any clause regarding exclusive use of the inputs or capital goods, they are eligible for the benefit of the Notification. It is not clear from the records of the case as to whether each and every Dobby card is used for manufacturing final products falling under both the Chapters namely 51 and 55. If some Dobby cards are used exclusively for the manufacture of final product falling under Chapter 55 of the Tariff certainly benefit of notification would not be available in respect of such Dobby cards. This is a matter of fact to be ascertained by the Field Formation. We, therefore, remand the matter to the Adjudicating Authority to examine the availability of benefit of Notification No. 67/95. We also agree with the learned Advocate that if finally the duty is held to be payable by them on Dobby card they would be eligible to avail of Modvat credit of the inputs used in or in relation to the manufacture of Dobby cards subject to the production of duty paying documents to the satisfaction of the Adjudicating Authority. The question of imposition of penalty is also remanded to be decided along with eligibility of Dobby cards to notification No. 67/95.