JUDGMENT

VENKATACHALIAH, J. :— These two appeals under Section 35-L of the Central Excises and Salt Act, 1944 (Act) by Messrs Mafatlal Fine Spinning & Manufacturing Co. Ltd., arise out of and are directed against the common appellate-order dated 10-2-1987 of the Customs Excise & Gold (control) Appellate Tribunal in Appeals Nos. 1105 of 1983 and 2540 of 1987 holding that in respect of the deferred duty on yarn appellant is liable to pay interest at 3 per cent of the duty under Rule 49A(2) of the Central Excises & Salt Rules,* 1944, as according to the Tribunal, the cotton-fabric cleared is not Grey (unprocessed) cotton-fabric.

* Central Excise Rules 1944 ........... Ed.

2. Appellant is engaged in the manufacture of cotton-fabrics in its composite mills and opted under Rule49A for facility of payment of duty of excise payable on the yarn to be deferred until the clearance of the cotton-fabrics manufactured therefrom.

The said Rule 49A provides for payment of interest on the excise duty payable on the yarn which is deferred till the manufacture and clearance of the fabrics made out of the dutiable yarn. As such payment is deferred, at the instance of the option of the manufacturer, till completion of manufacture and clearance of fabrics out of the yarn and Rule 49A envisages that when cotton-fabrics are cleared grey (unprocessed) the yarn duty shall be paid at the time of clearance of the fabrics along with 11/2% of the yarn-duty, by way of interest. But where the cotton-fabrics are cleared after processing, the interest payable on, and along with, the yarn-duty would, however, be 3% of the yarn-duty.

3. The question in these appeals is whether the interest-rate should be one & half per cent or three per cent which in turn depends upon whether the cotton-fabrics cleared are grey (unprocessed) or they are cleared after processing. The cotton fabrics cleared in this case, admittedly underwent the process of calendering and shearing . The cognate and sequential question is whether these processes render the grey fabric, a processed fabric within the meaning of Rule 49A(2). The Appellate Tribunal has held that calendering and shearing are finishing-processes and render the Grey fabrics to cease to be unprocessed so as to attract interest at 3%.

4. We have heard Sri Soli J. Sorabjee, learned Senior Counsel for the appellant and Sri A. K. Ganguly, learned Senior Counsel for the revenue.

There is no dispute that before clearance, the cotton-fabrics were subjected to calendering and shearing which, in the jargon of the textile industry are finishing processes. The Tribunal, accordingly, held that the cotton-fabrics cleared were not unprocessed for purposes of Rule 49A(1)(b). In regard to calendering, the Tribunal relied upon the views expressed by it in the case of Siddeshwari Cotton Mills Ltd. v. Collector of Central Excise, Calcutta (1984) 18 ELT297. The relevant part of Rule 49A provides :

"(1) when the cotton fabrics are cleared grey (unprocessed), the yarn duty payable shall be -

(a) the appropriate duty payable on such cellulosic spun yarn or cotton yarn, or both, as the case may be; plus

(b) one and a half per cent of the duty payable on such cellulosic spun yarn or cotton yarn, or both, as the case may be. by way of interest on the amount of yarn duty;

(2) when the cotton fabrics are cleared after processing, the yarn duty payable shall be

(a) the appropriate duty payable on such cellulosic spun yarn, or cotton yarn, or both, as the case may be; plus

(b) three per cent of the duty payable on such cellulosic spun yarn, or cotton yarn, or both, as the case may be, by way of interest on the amount of yarn duty :

Explanation - (Omitted as unnecessary.)"

5. Sri Sorabjee contended that such controversy, as is raised, as to whether the fabric, after calendering and shearing ceases to be unprocessed fabric would require to be resolved on the language of the Rule 49A itself and that the differentia for the attraction of the different rates of interest