Judgment:
1. The appellants are processors of cotton and man made fabrics and hold a Registration for the said processing attracting Central Excise levy.
a) Received duty paid embroidered fabrics classified under heading 5805 of Central Excise Tariff Act, 1985 for processing and return the same after processing to the suppliers. They complied with the processing and returned the fabrics without payment / due discharge of any duty thereon.
c) i) The notice dt. 03.02.1995 classified the goods cleared as processed fabrics and determined duty on the same based on value of fabrics plus processing charges at 10% ad valorem without showing the relevant heading.
ii) Notice dt. 23.08.1995 was similarly worded as notice dt.
03.02.1995.
iii) Notice dt. 17.01.1996 alleged clearance made under classification head 5804 to be with wrong exemption.
d) The original authority found that embroidery was done on Grey fabrics of cotton or man made fabrics, which were subjected to bleaching, dyeing, printing and any other process in order to make them suitable for wearing, the process being incidental and ancillary to completion of manufactured product and after considering Note 5 to Chapter 58, and finding that embroidery on cotton and man made are separately mentioned in tariff i.e. 5805.13, 5805.14 and 5805.19 appropriate duty has to be levied. He therefore approved all pending classification lists at 10% ad valorem under heading 5805.00 and confirmed the demands of notice dt. 03.02.1995 and 28.08.1995 as made and an amount of Rs. 28,299.10 on invoice No. 903/3895 in notice dt. 17.01.1996.
e) Commissioner (Appeals) found that the Grey embroidered fabric were processed, therefore, as per chapter note 8 of chapter 58 and Grey embroidered fabric is different from processed embroidered fabric in the market. Further manufacturer found mat chapter note 8 to chapter 58 came into force from midnight of 15/16 ^th March 1995, therefore held demands prior to that date were not maintainable.
Hence this appeal.
a) The Commissioner (Appeal's) order is not approving the demands for clearance prior to 15/16^th March 1995 are not under challenge.
b) Tribunal vide its order in the case of Parekh Prints {2003 (59) RLT 328} in para 2, have held that duty would be payable on account of value addition by the process undertaken on Grey embroidered fabric would be the true import of chapter note 8 to chapter 58 i.e.
before 15/16^th March 1995 the duty due to such value addition could not be levied but after that it could be charged to duty.
Commissioner's order to that effect restricting the demands subsequent to 15/16^th Marchl995 is therefore cannot be found fault with.
c) However, another Bench in the case of M/s. Dora Processors and M/s. Encee Dyeing & Printing Works Order No. CB/426 to 428/03 - WZB dt. 12.03.2002 have held that 'embroidery' is not fabrics and chapter note 8 is not applicable since it is applicable only to fabrics. This would cause us to come to a finding that there is a difference in opinion about the application of chapter note after 15/16^th March 1995.
d) In this view, this matter is required to be referred to Larger Bench to resolve the issues as regards the application of chapter note 8 to chapter 58.
"Whether chapter note 8 to chapter 58 of Central Excise Tariff Act, 1985 would apply to value additions due to processing, etc to embroidered fabrics as held in M/s. Parekh Prints {2003 (59) RLT 328 (CESTAT - Mumbai)} or chapter note 8 does not apply to processing done of embroidery on Grey fabrics or held in M/s. Dora Processors (CB/426 to 428/03 - WZB dt. 12.03.2002." 5. Registry should place the files before Hon'ble President to constitute the Larger Bench to determine the question referred.