Per V.K. Agrawal :

The issues involved in this appeal, filed by M/s. Birla VXL Limited, are whether Dobby Cards are chargeable to Excise duty and whether the benefit of Notification No. 67/95-CE is available to such Dobby Cards.

2. Shri R. Sudhinder, learned Advocate, submitted that the Appellants manufacture man-made as well as woolen fabrics; that they also manufacture yarn which is used in the manufacture of fabrics; that the fabric woven from yarn has various designs and patterns on them; that in order to obtain the required design of the fabric the yarn is fed through an item known as Dobby card which is nothing but Myler Sheets; that Myler sheets are plastic sheets which are cut into required length and the holes are punched on the same on the basis of required design; that such punched myler sheets are also referred as Dobby card in the trade; that this process of cutting and punching sheets would not amount to manufacture as the activity does not result it emergence of any new excisable item; that further Dobby cards are not standarised item which are generally bought and sold in the market as they are specific in design and are created for a specific purpose; that accordingly the Dobby cards are not chargeable to Excise duty. He, further, submitted that it is for the department to discharge the onus which has not been discharged by them nor the department has given any reason with supporting evidence to show that the Dobby cards are different and distinct from Myler sheets. The learned Advocate alternatively submitted that if the product is held to be excisable they are eligible to the benefit of Notification No. 67/95-CE; that the said notification exempts capital goods and inputs when manufacture in a factory and consumed within the factory of production from payment of duty under Chapter 51 and 55; that as both the man-made fabric and woolen fabric have been notified as final product under the notification issued under Rule 57A the benefit of notification is available to them; that Dobby cards are used for both the fabrics falling under Chapter 55 and woolen fabric falling under Chapter 51. The benefit of notification cannot be denied on the ground that Chapter 55 is excluded from the purview of Notification No. 67/95; that nowhere it has been mentioned in the notification that the inputs should be used exclusively for the specified final product; that as the Dobby cards are used for specified products namely woolen fabrics falling under Chapter 51 as well for man-made fabric falling under Chapter 55 which is excluded from the list of final products, the benefit of Notification is available to them. Finally he submitted that if it is held that they are liable to pay the duty on Dobby cards the Modvat credit of the duty paid on inputs should be extended to them.

3. Countering the arguments Shri R.C. Shankhla, learned DR., submitted that the process of cutting Myler sheets into size and punching wholes thereon a new identifiable product comes into existence; that the purpose of punching wholes is to obtain the required design of the fabric; that without the processes undertaken by the Appellants the design cannot be imprinted on the fabric; that myler sheets as such cannot be used for the purpose of obtaining design on the fabric; that the Dobby cards are distinct in name, character, and use; that the Dobby cards can be used by any manufacturer and can be easily brought to the market for being bought and sold; that the mere fact that they are specific to a particular machine does not mean that they are non-marketable. He, further, submitted that Notification No. 67/95 specifically excludes items falling under Chapter 55 of the Tariff from the benefit of the notification; that as the Appellants are manufacturing man-made fabric under Chapter 55 the benefit of notification is not available to them. He finally submitted that penalty is imposable on the Appellants as they never intimated manufacture and captive use of