J.H. Joglekar, Member (T)
1. The assessees M/s. Asian Leather Cloth Mfg. Co. purchased knitted cotton fabrics as well as knitted man-made fabrics and subjected them to process of PVC coating. In both cases the knitted fabrics were classifiable under chapter 60. The processed cotton fabrics fell under sub-heading 5903.19 and the processed man-made fabrics fell under sub-heading 5903.29. To this extent there is no dispute between the assessees and the department. During the period 1988-89 and 1989-90 Notification 63/87 prescribed the effective rate of duty on both varieties of fabrics processed. The relevant entries read as under:
02. 5903.19 Textile fabrics, Rs. 6.50 per square metre plus the duty impregnated, for the time being leviable on the base coated, cov- fabrics under Chapter 52, if not already ered or lami- paid. nated with plastics. 03. 5903.29 Textile fabrics, Rs. 8.00 per square metre plus the duty impregnated, for the time being leviable on the base coated, cov- fabrics under Chapter 54 or 55, as the ered or lami- case may be, if not already paid, nated with plastics.
On 12-6-1989 Notification 150/89-C.E. was issued omitting the reference to chapter 52 in column No. 4 of the entry at Sr. No. 2 of Notification 63/87. On 20-3-1990 Notification 57/90-C.E. was issued whereby the reference to the chapter numbers in column No. 4 against entry at Sr. No. 3 were omitted. The effect of these two notifications was that from the date of their issue cotton fabrics as well as the man-made fabrics after processing were liable to discharge the duty leviable on the base fabrics where it was not paid, irrespective of the classification attracted by the base fabrics at the stage of their manufacture.
2. During the period 12-7-1988 to 14-6-1990, 10 show cause notices were issued. In each case the period covered thereunder was within the normal limit of six months. The show cause notices covering the period February 1988 to June 1989 related to the products where the base fabrics was cotton knitted fabrics. The show cause notices covering the period January 1989 to 20-3-1990 related to products where base fabrics was man-made knitted fabrics. This is apparent in the finding of the Assistant Commissioner which is also not contested by either side.
3. The show cause notices were identically worded. The allegation made was that the benefit of Notification 63/87 was not available inasmuch as the base fabrics fell under chapter 60 and not under chapter 52 in the case of cotton fabrics and under chapter 54 or 55 in the case of man-made fabrics. The charge made in the show cause notice was crystallized by the Assistant Commissioner in the following words in his order :-
“A reading of this notification makes it absolutely clear that for availing of the benefit of the said notification the base fabrics should fall under chapter 52 and the duty thereon should be paid”.
With this interpretation in mind he held that the assessees had failed to fulfil the condition in column No. 4 and therefore the differential duty was confirmed. Against this order the assessees filed an appeal. Before the Commissioner (Appeals) the citation of the Tribunal judgment in the case of Bhor Industries Ltd. -1995 (78) E.L.T. 455 was made which had also been made before the Assistant Commissioner. We have seen the judgment. In the judgment the Tribunal took into account the aspect of limitations. The Tribunal also gave their views on the possible classification of certain base fabrics after processing: However the Tribunal on voicing their opinion remanded the matter back for de novo adjudication. Therefore strictly speaking the order cannot be termed to be one which gives the ratio to be followed by other benches. The learned Commissioner arrived at a very curious finding. He went on the classification of the goods cleared by the assessees and held that if they could not be covered under Sr. Nos. 2 & 3 on the subject notification, then they would be covered under Sr. No. 5 of the table appended to that notification. With this the duty calculation would change and therefore he remanded the case back to the Assistant Commissioner for re-working the demand.
4. Against this order the revenue filed an appeal numbered as E/2444/R/96 and the assessees filed a memorandum of cross-objection bearing No. E/CO/38/97. The claim made in appeal was that the Commissioner went beyond the scope of the show cause notice in holding for the classification of the goods under sub-heading 5903.99 attracting the rate of duty as against Sr. No. 5 of the table to the subject notification and on this ground asked for setting aside the order. The main plea made in the CO is that the effective rate as per Sr. Nos. 2 & 3 is available. Appeal No. E/2293/R/96 was separately filed by the assessees against the impugned order. The grounds are the same as were made in the CO to the revenue appeal.
5. In both sets of appeals both sides have brought in aspects such as changes in the structure of the tariff and subsequent notifications such as 150/89 and 57/90 and have advanced extensive arguments on the capability of retrospective applications of those notifications.
6. We have considered the various submissions.
7. The short issue is the interpretation of the wording in column No. 4 in the notification against the two serial numbers. Admittedly the wording is such as to cause creation of some confusion. The wording pre-supposes that base textile fabrics when made of cotton were classifiable under chapter 52. A similar presumption as to classification under chapter 54 or 55 is made where the base fabrics were man-made fabrics. For such fabrics at grey stage the tariff rate of duty was nil. Both these chapters covered woven fabrics. Knitted fabrics made of cotton fell under 6001.11 and attracted tariff rate of duty at 8%. Knitted fabrics made of man-made material attracted nil rate of tariff duty under 6001.12. However Notification 109/86, dated 27-2-1986 brought such fabrics on par with woven fabrics. As a result the fabrics at grey stage whether falling under chapter 52, 54 or 60 attracted nil rate of duty. What the Notification 63/87 prescribed was that at the time of payment of duty on cotton fabrics duty on base fabrics was payable but the notification mentioned such base fabrics as falling under chapters 52, 54 and 55 only and omitted any reference to chapter 60. Now the law is well settled, that the notification has to be interpreted strictly on the basis of the words used there without any intendment. In that case it has to be assumed that the non-reference to chapter 60 was deliberate and the requirement of paying the duty on the base fabrics arose only where base fabrics fell under chapters 52, 54 or 55. Conversely for base fabrics classifiable under chapter 60, there was no such requirement. In other words the processed fabrics made from the base fabrics under chapter 60 has been put a lesser impact upon. This is all that the two entries say. These entries can never be interpreted to mean that where the base fabrics did not fall under chapters 52, 54 or 55, the benefit of these entries was not available. Any such interpretation would do harm to the interpretation of the notification.
8. This is what the Commissioner (Appeals) should have concentrated upon. Instead he went into the ratio of the Tribunal’s judgment in the case of Bhor Industries which, strictly speaking, did not apply to the facts of the appeal before him and misled himself in classifying the end produce when he was neither called upon to do so nor was he required to do so. In doing so he overstepped the limits of the show cause notice rendering his own order untenable.
9. As we have observed above both sides have pointed out the subsequent amendments to the notification whereby the barrier was removed from the levy of the duty at the base stage when computing the duty liability on the processed fabrics. Voluminous arguments were advanced on the logic behind the amending notifications and thereby justification is sought for denial of the benefit of the notification. We find the later developments were entirely, extraneous to the proceedings. The show cause notice merely contained itself in misinterpreting the coverage of the conditions in Sr. No. 4. Any attempt to advance or to justify the findings of the Assistant Commissioner by a reference to the later developments would also shift the focus to beyond the coverage of the show cause notice which we cannot permit. We therefore hold that in the situation and during the period the benefit of exemption under Sr. Nos. 2 & 3 of the notification was available.
10. The appeals are decided in these terms.