ORDER
G. Sankaran, Sr. Vice-President
1. When this matter was taken up on 6-7-1987, the appellants were not represented in the Court. Since there was no communication from them in response to the notice of hearing, it was decided to proceed with the hearing. We have, accordingly, heard Shri K.C. Sachar, Departmental Representative for the respondent and perused the record.
2. Briefly stated, the facts are that the appellants are engaged in the manufacture of cotton fabrics and man-made fabrics classifiable under Items Nos. 19 and 22 respectively of the First Schedule to the Central Excises and Salt Act, 1944 (the Schedule is hereinafter referred to as the “CET”). They filed a classification list dated 31-10-1979 in respect of Sort No. 600010 – fabrics described as polyester cotton warp voil containing 54% polyester and 46% cotton at grey stage and 100% polyester after processing. The appellants claimed classification of the goods under Item No. 22(1) of the CET. However, the Assistant Collector, under his order dated 11-3-1980, directed that in addition to the duty payable on the final processed fabric under Item No. 22 CET, the grey stage fabric also had to pay duty as cotton fabrics under Item No. 19I(b) CET. In appeal, the Collector of Central Excise (Appeals), Bombay, upheld this order by the impugned order dated 31-1-1983. In the course of the proceedings before him, the appellants had referred to the Gujarat High Court judgment in the case of Ahmedabad Manufacturing and Calico Printing Co. Ltd. in Special Civil Application No. 67 of 1968 decided on 30-4-1970. However, the Collector (Appeals) was of the opinion that the judgment was not relevant in view of the retrospective amendment made to Central Excise Rules 9 and 49.
3. In the Memorandum of appeal, the appellants have inter alia reiterated their reliance on the Gujarat High Court judgment (referred to earlier). They have also stated that the fabric having the composition of 54 % polyester and 46 % cotton which emerges at an intermediate stage in the process of manufacture of the final product is subjected to the process of carbonization by which the cotton fibre content of the intermediate product is removed entirely resulting in change in the composition which fixes the classification of the final product as man made fabrics under Item No. 22 CET.
4. The judgment of the Gujarat High Court has since been upheld by the Supreme Court in Union of India and Ors. v. Ahmedabad Manufacturing and Calico Printing Co. Ltd. (Calico Mills), Ahmedabad – 1985(21) ELT 633 (S.C.).
5. Shri Sachar, in his submissions, however, contended that the Supreme Court in the Calico Mills case (supra) was not concerned with the excisability of the intermediate product but of the final product having cotton content of about 38.48% and artificial silk contentof 61.52%, conforming to the requirements laid down in Item No. 22 CET. Shri Sachar sought to distinguish the facts of the present case by stating that the point at issue herein was the dutiability of the intermediate product and not of the final product which was not in dispute. So long as intermediate product emerged in the course of manufacture and it conformed to the description and prescription in the Central Excise Tariff Schedule, it became taxable under that item even though the intermediate product was only for consumption for the manufacture of the final product.
6. We have carefully considered the submissions of both sides. The issue before the Supreme Court in the case of Ahmedabad Manufacturing and Calico Printing Co. Ltd. was whether the goods called “Cali-kut Special” manufactured by the mills were liable to excise duty under Item No. 19 or Item No. 22 of the CET – in other words, whether merely because the goods in question conformed to the percentage composition laid down in Item No. 19 at the intermediate stage, they were liable to be taxed under Item No. 19 which imposed a heavier duty than the duty payable under Item No. 22. The goods were for a long time being classified under Item No. 22 in view of the cotton content being less than 40%. All of a sudden, the department proposed to tax the goods under Item No. 19 CET on the ground that at the intermediate stage of production, the cotton content was more than 40% while the artificial silk content was less than 60%. The Supreme Court held that the character of the goods at the intermediate stage of production could not be taken into consideration for determining the duty liability of the final product. The Court held that though the product in question might have fallen under Item No. 19 CET at the intermediate stage of production, at the final stage, when it became exigible, it became taxable under Item No. 22 only and not under Item No. 19 CET.
7. It is clear that, in the aforesaid case, the issue before the Supreme Court was the classification, and the dutiability of the final product which the department ought to classify and charge duty on, based on its character at the intermediate stage of production. In the case before us, the issue is different. There is no dispute as to the classification and dutiability of the final product under Item No. 22 CET. It is the classification and dutiability of the product containing 54% polyester and 46% cotton (from which the final product is made) that is in issue. Having regard to the composition there is no doubt that the product fell under Item No. 19(I)(b) CET. We cannot read from the Supreme Court’s judgment that if in the course of production of goods which are removed out of the factory, goods emerge which fall squarely within the description of a Tariff entry, the latter goods cannot be, or ought not to be, classified and subjected to duty under that entry, in view of the amendment to Rules 9 and 49 of the Central Excise Rules, which has the effect of making removals of excisable goods for consumption within the factory for manufacture of other goods, removals for the purpose of liability for duty.
8. In this view of the matter, we do not find any reason to interfere with the impugned order and, in the result, we dismiss this appeal.
