ORDER
K.L. Rekhi, Member
1. In the impugned order, the Collector has held that the appellants processed “man made fabrics” with the aid of a curing machine which attracted central excise duty, that they removed such processed fabrics unauthorisedly without payment of the duty and that they did not take the required Central Excise Licence and committed other attendant breaches of the rules. He has ordered the appellants to pay the additional excise duty and handloom cess amounting to Rs. 1,67,365.58, imposed on them a penalty of Rs. 10,000; confiscated certain quantities of processed fabrics seized from the premises of the appellants and appropriated the security deposit of Rs. 1,500 towards fine in lieu of confiscation of the said fabrics. The appellants are in appeal before us against the said order.
2. During the hearing before us, the appellants admitted that the appliance used by them was a machine. However, they maintained that the process which they undertook with the help of this machine was not curing, heat setting or stentering but was a simple process of removing the odour of kerosene, or turpentine (contained in the printing dyes) by passing the printed ‘man made sarees’ through a chamber heated with gas stoves. The printig itself was not undertaken by them. It is their customers who printed the sarees on cold tables and then sent them to the appellants for removing the bad smell. The appellants contended that no new product was brought into existence by their process as printed sarees with the odour were nevertheless the printed sarees and after the odour was removed by them, they still remained only printed sarees. This was the only plea which the appellants pressed before us.
3. The learned representative of the department reiterated the Collector’s reasoning and conclusions. He drew our attention to page 118 of the Collector’s order in the paper book which states that the appellants had admitted before the Collector that they charged from customers curing charges at the rate of 45 to 50 paise per metre of the fabric. The learned representative of the department contended that such high charges could not be for removing bad odour from the fabric only. He went on to say that the appellants had admitted in their initial statements that the function of the machine used by them was for curing the fabric. The contention that the purpose was the removal of odour only was an afterthought which came into the proceedings one year later, in the reply of the appellants to the show cause notice. The learned representative of the department relied on the Supreme Court judgment in the case of Empire Industries Ltd. and Ors. v. Union of India and Ors. , particularly paragraph 31 thereof, and maintained that the curing process of the appellants with the help of the machine was a finishing process and had attracted duty.
4. We have carefully considered the matter. It is common ground that the “man made fabrics” or sarees received by the appellants from customers had been screen printed on cold tables. The question is whether the printing process was already complete or not. The answer to this question should depend on whether the sarees as received by the appellants were marketable as printed sarees in that condition or not. The answer to this further question is obviously no; otherwise, the sarees would not have been sent to the appellants for some further process which costed the customers 45 to 50 paise per metre besides two-way freight and other overheads. It is not material whether the process undertaken by the appellants cured the fabrics (i.e., their paint/dye used in screen printing on cold tables) or it simply removed the bad smell from the fabric. The material point is that without the heat treatment process undertaken by the appellants, the fabrics were not saleable as printed fabrics. In that sense, the fabrics as received by the appellants were not complete or marketable as “printed man-made fabrics” (sarees). They became complete or marketable printed sarees only after they had been subjected to the heat treatment process by the appellants. We, therefore, do not agree with the appellants that what they received were already printed sarees and they remained printed sarees only even after their process and so they had not brought into existence any new product. While it is true that the heat treatment process adopted by the appellants did not amount to “stentering” or “heat setting” as understood in the textile parlance, it was nevertheless a process which turned unfinished printed sarees into fully finished and commercially acceptable printed sarees. To quote the Hon’ble Supreme Court in case M/s. Empire Industries Ltd. (supra):
Whatever may be the operation, it is the effect of the operation on the commodity that is material for the purpose of determining whether the operation constitutes such a process which will be part of ‘manufacture’. Any process or processes creating something else having distinctive name, character and use would be manufacture.
We agree with the Collector that the heat treatment process given to the fabrics by the appellants was a finishing process and was covered by the expression “any other process” occurring in Section 2(f)(vii) of the Central Excises and Salt Act, 1944. Such processing, therefore, amounted to manufacture. It has already been settled by the Supreme Court in the case of M/s. Empire Industries Ltd. (supra) that processing attracted further duty under items 19 and 22 of the Central Excise Tariff. Coming to the exemption notification No. 79/82-CE dated 28-2-1982, since the appellants admittedly employed a machine to give heat treatment process to the fabrics, they were not entitled to the exemption. We, therefore, confirm the demand for duty.
5. So far as the penalty and confiscation of goods are concerned, we find from page 122 of the Collector’s order placed in the paper book that the appellants had written a letter dated 6-2-1984 to the Assistant Collector of Central Excise seeking exemption to the “man made fabrics” processed by them. The Collector has further stated that such a letter was received by the Assistant Collector and apparently no reply was given by the Assistant Collector to the appellants. Since the appellants had made the authorities aware of their existence and their process and had sought guidance/exemption from them, we hold that levy of penalty on them and confiscation of their goods were not justified. Accordingly, we set aside the penalty as well as the order of confiscation. Consequential refund of the amount of fine appropriated from the security deposit made by the appellants (in lieu of confiscation of the goods) should be granted to the appellants.
6. The appeal is decided in the above terms.