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Collector Of Central Excise, Bombay v. Maharashtra Fur Fabrics Ltd. .
Factual and Procedural Background
The Collector of Central Excise, Bombay filed this civil appeal challenging Order No. E/254 of 1994-D issued by the Customs, Excise and Gold (Control) Appellate Tribunal in Appeal No. E/4217 of 1990-D dated 29-4-1994. The Tribunal had reversed concurrent findings of the Assistant Collector and the Collector (Appeals), Bombay, and held that the respondent-assessee was entitled to exemption under Notification No. 109/1986-CE dated 27-2-1986, as amended by Notification No. 3/1988-CE dated 19-1-1988. The respondent manufactures high-fur fabrics by a sliver-knitting process and, until the 1988 amendment, enjoyed a “nil” rate of duty under Heading 60.01. After insertion of a proviso withdrawing the benefit when certain finishing processes are undertaken, the Department issued a show-cause notice alleging that the respondent’s drying operation through a hot-air stenter amounted to “stentering,” disqualifying it from the exemption. The Assistant Collector and the Collector (Appeals) ruled against the assessee; the Tribunal ruled in its favour; hence the present appeal.
Legal Issues Presented
- Whether the respondent’s drying operation using a hot-air stenter falls within the proviso (“stentering, tentering, … or any other process”) inserted in Notification No. 109/1986-CE, thereby disentitling it to the exemption.
Arguments of the Parties
Appellant (Collector of Central Excise)
- The respondent subjects the fabric to “stentering,” a process explicitly covered by the proviso, so the exemption cannot apply.
- Even if not strictly “stentering,” the process is analogous and therefore captured by the phrase “or any other process,” interpreted ejusdem generis with the listed processes.
Respondent-Assessee
- The acrylic emulsion used is water-based; passage through hot-air stenter is merely for drying and does not constitute stentering/tentering.
- Certificates from the machine manufacturer and expert opinion indicate the process is distinct from stentering.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Court closely examined the wording of the amended notification. Applying the ejusdem generis rule, it held that the general phrase “or any other process” must take colour from the specific processes listed earlier, including stentering/tentering. The respondent admittedly passes fabric through a hot-air stenter for drying; even if this is not “stentering” in a strict technical sense, it is “analogous” to stentering and therefore squarely within the proviso. The Court noted that both the Assistant Collector and the Collector (Appeals) had personally inspected the unit and confirmed use of the stentering process, whereas the Tribunal relied mainly on dictionary meanings and expert opinions. Accepting that the factual activity is akin to stentering, the Court concluded that the benefit of the exemption is lost under the proviso.
Holding and Implications
Appeal Allowed; Tribunal’s order set aside. The respondent is not entitled to the exemption under Notification No. 109/1986-CE as amended. The decision reinstates the assessment of duty made by the Department. No order as to costs was made. The ruling affects only the parties and sets no new precedent beyond reaffirming the application of the ejusdem generis principle to interpret exemption notifications.
Order
1. This appeal is filed by the Collector of Central Excise, Bombay against the order, No. E/254 of 1994-D, of the Customs, Excise and Gold (Control) Appellate Tribunal in Appeal No. E/4217 of 1990-D dated 29-4-1994. By the impugned order, the Customs, Excise and Gold (Control) Appellate Tribunal (for short “the Tribunal”) set aside the order of the Collector (Appeals), Bombay, affirming the order of the Assistant Collector holding that the respondent is entitled to the benefit of Notification No. 109/1986-CE dated 27-2-1986, as amended by Notification No. 3/1988-CE dated 19-1-1988 (for short “the notification”).
2. The question that arises for consideration is whether the respondent is covered by the proviso inserted in the notification.
3. The respondent assessee manufactures high fur fabrics by sliver knitting process. In Classification List No. 1/1987 dated 10-3-1987 filed by the respondent, the product was classified under Heading 60.01 and benefit of the said notification was claimed attracting “nil” rate of duty. There is no dispute that the respondent was entitled to the exemption granted under the said notification till 19-1-1988 when the proviso was inserted therein.
4. It would be useful to read Notification No. 109/1986-CE dated 27-2-1986, as amended by Notification No. 3/1988-CE dated 19-1-1988 here:
“In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, read with sub-section (3) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Central Government hereby exempts woven pile fabrics and chenille fabrics, tufted textile fabrics and knitted or crocheted fabrics falling under Heading 58.01 or 60.01 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), from so much of the duty of excise and the additional duty of excise leviable thereon under the Central Excises and Salt Act, 1944 (1 of 1944) and the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) as is in excess of the duty of excise and the additional duty of excise leviable under the aforesaid two Acts on the corresponding woven fabrics falling under Chapter 51, 52, 53, 54 or 55 of the said Schedule, read with any notification for the time being in force:
Provided that nothing contained in this notification shall apply to knitted or crocheted fabrics of man-made textile materials falling under Sub-Heading 6001.12 of the said Schedule and subjected to the process of bleaching, dyeing, printing, shrink-proofing, tentering, heat-setting, crease-resistant processing or any other process or any two or more of these processes.
Explanation.—For the purposes of this notification, the expression, ‘corresponding woven fabrics’ means fabrics specified in Chapter 51, 52, 53, 54 or 55 which corresponds to knitted or crocheted fabrics with reference to the processes carried out thereon, or the value of the fabric per square metre, or the textile material contained therein.
2. This notification shall come into force on the 28th day of February, 1986.”
5. The notification discloses that the benefit available to sliver pile fabrics falling under Heading 58.01 or 60.01 of the Schedule to the Central Excise Tariff Act, 1985 is lost if the product is subjected to the process of bleaching, dyeing, printing, shrink-proofing, tentering, heat-setting, crease-resistant processing or any other process or any two or more of these processes.
6. A careful reading of the proviso to the notification would show that by resorting not only to the process of bleaching, dyeing, printing, shrink-proofing, tentering, heat-setting, crease-resistant processing, but also to “any other process or any two or more of these processes”, the respondent would lose the benefit of the exemption. It is a well-established principle that general terms following particular expressions take their colour and meaning as that of the preceding expressions, applying the principle of ejusdem generis rule, therefore, in construing the words “or any other process”, the import of the specific expressions will have to be kept in mind. It follows that the words “or any other process” would have to be understood in the same sense in which the process, including tentering, would be understood. Thus understood, a process akin to stentering/tentering would fall within the meaning of the proviso and, consequently, the benefit of the notification cannot be availed by the respondent.
7. In the reply to the show-cause notice issued by the Assistant Collector, Central Excise, Panvel Division, the respondent stated, “the acrylic emulsion is water-based and hence the fabric has to be dried. For this purpose, it is passed through hot air stenter”. The respondent sought to explain this with reference to the certificates given by the manufacturer of the machine to say that the process does not amount to stentering.
8. The Assistant Collector found that the respondent was using the process of stentering. On appeal, the Collector (Appeals), having inspected the manufacturing process in the factory of the respondent, affirmed the view of the Assistant Collector that stentering process was being resorted to by the respondent. However, on further appeal by the respondent, the Tribunal after referring to the expert opinion and the dictionary meaning of the words “stentering” and “tentering” held that no process of stentering/tentering is being carried out.
9. Even accepting the Tribunal's finding that the process does not strictly amount to stentering, it cannot be disputed that the process adopted by the respondent is analogous to stentering, as admittedly, the respondent is drying the fabric by passing it through the hot air stenter.
10. In this view of the matter, the proviso clearly applies and the respondent, therefore, is not entitled to the benefit of the notification. The order under appeal is set aside.
11. The civil appeal is, accordingly, allowed. In the facts and circumstances of the case, we make no order as to costs.
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