K.L. Rekhi, Member (T)

1. The appellants manufacture coated cotton fabrics (upholstery cloth). They purchase grey cotton fabrics from the market. Before coating them, they first apply dye of the required colour to the grey fabrics. The dispute in this appeal is whether, during the period from 16-3-76 to 28-2-77, the appellants were liable to pay processing duty on account of their activity of dyeing the grey fabrics. The Department has served on them a demand for the processing duty of Rs. 54,802.62 and both the lower authorities have upheld this demand.

2. The pleas of the appellants against the demand are as under : -

(1) The show cause notice dated 15-3-77 issued by the Superintendent states that the demand was raised on account of the exemption notification No. 78/76-C.E., dated 16-3-76. An exemption notification can only grant relief from payment of duty; it cannot impose duty reliance on 1978 [E.L.T. J 211 (Patna) -M/s. Bata India Ltd. v. Assistant Collector of Central Excise, Patna.]

(2) Duty can be collected only on the end product ; otherwise repeated taxation at. intermediate stages would lead to absurd results [1983 E.L.T. 54 (P. H.) (Punjab Haryana) Punjab Rubber