LexM/S. MATHANIA FABRICS versus COMMNR. OF CENTRAL EXCISE, JAIPUR
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[2008] 1 S.C.R. 58 A MIS. MATHANIA FABRICS v. ,• . COMMNR. OF CENTRAL EXCISE, JAIPUR (C.A. No. 5398 of 2002) B JANUARY 4, 2008 [DR. ARIJIT PASAYAT AND D.K. JAIN, JJ.] Central Excise Act, 1944/Central Excises and Salt Act, 1944 - ss. - 11 A - Excise duty - Exemption from - By c Notifications - To cotton fabrics processed without the aid of power - Two assesses admittedly using power for mixing of chemicals, lifting of water and pouring in the bleaching tanks and kiers - Exemption denied and duty levied invoking extended period of limitation - Tribunal upholding the case of D Revenue - In case of one assessee Tribunal reduced the penalty amount - Held: Exemption rightly denied - Power was used by the assesses for the process undertaken by them - Invocation of extended period of limitation is permissible in respect of the assessee in whose case Tribunal reduced the E penalty amount - In the other case invoking of the limitation period is permissible only five years backward from the date of second show cause notice - Notification Nos. 173177 dated 18.6.1977, 130182-CE dated 20.4.1982, 28194-CE dated 1. 3. 1994, 8196-CE dated 23. 7. 1996, 5199 dated 1. 3. 1999 and 35199 dated 4.8.1999 - Central Excise Tariff Act, 1985 - F Chapter 52. '-. In Civil Appeal No. 1856 of 2005, appellant-assessees were en~1aged in processing of cotton fabrics. They were undertaking the process of bleaching, mercerizing, G dyeing, priitting, washing, dying of the fabrics. They claimed exemption from duty granted to 'cotton fabrics' processed without the aid of power, under Notification Nos. 28194-CE dated 1.3.1994, 8196-CE dated 23.7.1996 and 5/99 dated 1.3.1999. However, they admitted to have used H the power for certain ancillary areas such as mixing of 58 M/S. MATHANIA FABRICS v. COMMNR. OF CENTRAL 59 EXCISE, JAIPUR ~. chemicals etc. In view of use of power, Revenue denied A the benefit of exemption. Duty was levied invoking extended period of limitation u/s 11-A. Customs, Excise and Service Tax Appellate Tribunal upheld the case of Revenue. In Civil Appeal No. 5398 of 2002, appellants-assessee B were engaged in bleaching of cotton fabrics without the > aid of power. They were availing exemption under Notification No. 173/77 dated 18.6.1977 as amended by notification No. 130/82-CE dated 20.4.1982. During a visit to the factory premises, Revenue found that in the process c of bleaching, power was being used for lifting water from undergr9und tanks and pouring water in the bleaching tanks and kiers. Show cause notice was issued in 1986 ' denying the exemption, for the period 14.12.1980 to 15.12.1985. The proceedings therein were set aside in D appeal on the ground that the order was without the authority of law in view of amended Section 11 A of Central Excises and Salt Act, 1944. In 1989 fresh show cause notice was issued without mentioning about the first notice. Revenue denied the exemption in view of the use E of power and levied duty invoking extended period of limitation. Plea of the assessee was that no power was used in the process. Customs Excise and Gold Control Appellate Tribunal held that the assessee was not entitled to benefit of exemption as the process was being carried Fi _j out with the aid of power. Hence the present appeal. Dismissing Civil Appeal No. 1856 of 2005 and partly allowing Civil Appeal No. 5398 of 2002, the Court HELD: 1. The appeal No. 1856 of 2005 is without merit. G Use of power in the operation of stirrer and electric motor ~ for lifting water and caustic soda would amount to manufacture with the aid of power. The letter of Commissioner of Central Excise dated 10.1.1999 on which reliance is placed by the assessee to contend that there was doubt about the nature of the process involved, is H 60 SUPREME COURT REPORTS [2008] 1 S.C.R. A significant. It is not known under what circumstances the .,. letter was written. The stand of the assessee about the applicability of Section 11A was held to be untenable by the Tribunal. It is to be noted that the penalty amounts were equivalent to the extra demand raised but the B Tribunal has reduced to it to Rs.25,00,000/-. [Para 7] [63- D, E, F] c JK. Cotton Spg. Wvg. Mills Co. Ltd. v. Sales Tax officer, " Kanpur 1997 (91) ELT 34 SC; CCE, v. Rajasthan State · Chemical Works 1991 (55) ELT 444 SC - referred to. 2. Factually, in civil appeal No. 5398 of 2002, the stand of the assess
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