K. Prakash Anand, Member (T)

1. It is alleged in the present matter that the appellant company used to receive proofed coloured canvas from various proffers , which was given by them to tailoring, contractors, who used to fabricate such proofed canvas into tarpaulin with the aid of power operated sewing machines. The company's agency division, in this manner, was allegedly fabricating tarpaulin for more than 25 years but this fact was not reported to the Department. The process of fabrication of tarpaulin adopted by the company and other details regarding employment of contract labour, use of power operated sewing machines, etc. were also not intimated to the Department; nor was a sample of completed tarpaulin furnished to the Department to enable it to examine it for purposes of correct classification. At one stage, a clarification was sought by the company from the Department but on a hypothetical note stating that they were planning the manufacture of tarpaulin in their mills and not that they were already engaged in such manufacture. It is alleged that the appellant company had failed to pay appropriate excise duty on the tarpaulins manufactured in their Agencies Division from the period June 1980 to February 1985, thus evading duty amounting to Rs. 47,64,964.04.

2. Shri P.K. Kurien, Advocate appears on behalf of the appellant company and states that the tarpaulin on which the duty has been demanded from the appellant company is manufactured out of proofed canvas by cutting into sizes, stitching and fixing eyelets. The proofed canvas is cotton fabric falling under Item 19 of the Central Excise Tariff. It is stated that the grey canvas had already paid duty and, therefore, tarpaulin could not be subjected to any further duty. It is urged that tarpaulin is, in fact, a proofed canvas which is specifically covered under Item 19 of the Central Excise Tariff, Therefore, the question of its attracting Item 68 of the Central Excise Tariff does not arise.

3. The appellants stand is that proofed canvas itself is tarpaulin. In support of this, it is stated that a reference had been made before the lower authority to the' Handbook of Industrial Textile by Earnest R. Kasseli. Also, an affidavit was furnished by Mr. R. Singh, Regional Manager of a transport company. In addition, it is stated that appellant had furnished an affidavit of Dr. V. Subramaniam, Head of the Department of Textiles.

4. It is further urged that a letter had been addressed by the appellant company "to the Department on 13th September, 1984 from the BC Mills Division, seeking a clarification which was given to them on 26th September, 1984. The reply given by the Asstt. Collector was as follows:-

If the, base fabric is cotton, tarpaulin finish will fall under Tariff Item 19 only.

In view of the foregoing clarification, the appellant company rightly concluded that the product is cotton fabric and nothing else, and it cannot be stated that there was any suppression or mis-statement of facts by the appellant company warranting demand of duty beyond the normal period.

5. Shri P.K. Kurien, learned advocate has submitted that the Order-in-Appeal wrongly and illegally relied on the decision of the Madras High Court in M. Jeevajee Co. v. The State of Tamil Nadu MANU/TN/0425/1973 : 34 STC 4, as this judgment was over-ruled by the Supreme Court in Porritts Spencer (Asia) Ltd. v. State of Haryana MANU/SC/0340/1978 : 42 STC 433. It is further submitted that the Madras High Court itself did not follow its earlier judgment in deciding three cases later on viz., Narasimha Agencies v. State of Tamil Nadu MANU/TN/0407/1977 : 40 STC 217 and The Deputy Commissioner (C.T.) Coimbatore Division v. South India Traders, and the State of Tamil Nadu v. Navinchandra Co. STC 423.

6. Shri Kurien further urged on behalf of the appellant that the respondent has completely misinterpreted the decision of the Gujarat High Court in the case of Pokandas and Bros. v. State of Gujarat MANU/GJ/0096/198