V.T. Raghavachari, Member (J)

1. M/s. Synthetic Cutting Tools Manufacturing Company manufacture resin impregnated/coated discs of glass fabrics which are excisable under item 22-F of the First Schedule to the Central Excises Salt Act, 1944. The 'Assistant Collector under order dated 7.7.1979 held these discs liable for duty under tariff item No. 22F CET as they were not eligible for the exemption under notification No. 87/76-CE dated 16.3.1976. On Appeal the said order was set aside by the Appellate Collector under order dated 20.11.8.0. He held that the fabric continues to be the fabric even when cut into discs and as the entitlement of full exemption to the fabrics is not in dispute the discs were also entitled to the same exemption. The Central Government being of the view that the said order of the Appellate Collector was not proper, legal and correct, issued notice dated 14.5.81 under section 36(2) of the Central Excises and Salt Act calling upon the manufacturer to show cause why the order of the Appellate Collector should not be set aside and that of the Assistant Collector restored or any other order passed as may be deemed fit and proper. The Government was prima facie of the view that on account of the impregnation the discs had lost their identity as glass fabrics and that they were not glass fabrics in commercial parlance and therefore the exemption notification No. 87/76 was not available to the assessee. The assessee replied contending that the order of the Appellate Collector had been correctly passed. It is the proceedings initiated under the review notice that are, on transfer, now before us as this deemed appeal.

2. We have heard Shri K.C. Sachar for the Department and Shri V. Lakshmikumaran, Advocate for the respondents assessee.

3. Both sides are agreed on (i) that the subject goods (Discs of various sizes cut out of the resin coated glass fabric) are classifiable under item 22-F of the first schedule to the Central Excises and. Salt Act and (ii) the resin content of the said fabric was less than 33%.

4. Under Notification No. 87/76-CE dated 16.3.76, three types of goods falling under item 22-F and specified in the table attached to the notification were granted full exemption of duty. Item three of the table is "Glass Fabrics". The Assistant Collector under his order held that the exemption did not extend to processed glass fabrics and therefore necessarily did not extend to the discs cut out of the processed glass fabrics. The Appellate Collector proceeded on the basis that the question of full exemption to the fibre glass fabrics is not in dispute and that the Assistant Collector's conclusion that the exemption cannot be extended to the stage of cut discs is not tenable since the fabric continues to a fabric even after being cut into discs. The review notice of the Government mentions two reasons only as to why the findings of the Appellate Collector were not proper. They were (i) on account of impregnation the goods had lost their identity as glass fabrics and (ii) the goods are not glass fabrics in commercial parlance. In view of the fact that these two grounds had been mentioned in the review notice we think that it would be necessary to consider these two grounds only though the arguments before us ranged over a wider area. So far as the second reason mentioned above is concerned, we may note that except observing that the cut discs were not known as glass fabrics in commercial parlance no supporting material has been referred to in the show cause notice or even in the submissions before us. The only support Shri Sachar sought to derive in respect of this submission is that the respondents themselves had described these goods as discs in the course of their submissions before the lower authorities. But we feel that no support can be derived on this basis since the dispute was with reference to the cut discs and therefore, they had to be necessarily referred to in that fashion in the proceedings be