Per G.R. Sharma:

The captioned five appeals, four preferred by M/s. Dhvani Terefabs Exports Pvt. Ltd. and one preferred by the Revenue were heard together. In addition the Misc. application 11 led by Revenue was also heard and are being disposed of by this common order.

2. Out of the above five appeals, in the three appeals filed by M/s. Dhvani Terefabs Exports the issue is the same, therefore, they were heard first. The issue in these three appeals is whether terry towels made by cutting, hemming and stitching without the aid of power by the appellant are dutiable or not.

3. The appellants are engaged in the manufacture of knitted pile fabrics. It emerges in running length. There is no dispute about its classification under Chapter Heading 60.01. It is processed. Duty on the processed fabrics is paid. The appellant receives duty paid processed fabrics in its factory. It is then cut to size and edges hammed with sewing machine. Revenue was of the view this activity amounts to manufacture and 'made up article' classifiable under Chapter Heading 63.01 is produced in terms of Note 5 of Section XI. The demand of duty in the present case relates to this activity. The Department alleged that the appellants had manufactured and removed clandestinely 'made up articles' without obtaining registration etc. During investigation statements of S/Shri B.R. Pandey, Manager, Amitabh Tiwari, Manager Works and Pradeep Waikar, Accountant were recorded. It was alleged that made up articles are classifiable under Chapter Heading 6301 and hence dutiable. Accordingly, a SCN was issued to the appellants asking them to explain as to why the terry towels manufactured by them should not be classified under Chapter Heading 6301 and why duty should not be demanded from them under Rule 9 (2) and proviso to Section 1 1A (l)and why penalty should not be imposed. In reply to the SCN, the appellants submitted that their product was not classifiable under Heading 63.01. It was also submitted that Section Note 5 of Section XI was applicable to their case in-as-much as towels in question were in the form of' made up articles' after cutting, stitching and hemming. It was submitted that there was no dispute that knitted pile fabrics fall under Chapter 60; that such knitted fabrics are processed with the aid of power. The duty on such knitted fabrics was paid. It was contended that power was used in the processing of knitted fabrics. It was submitted that the SCN alleges that since fabrics had been knitted and processed with the aid of power even though such fabrics are cut and stitched without the aid of power and since at the stage of processing of fabrics power is used the towels are ineligible for the benefit of Notification No. 65/87 S.No. 4. It was argued that this interpretation was incorrect. After careful consideration of the submissions Ld. Commissioner held that the towels are made up articles; that power was used in the manufacture of towels; that exemption under Notification No. 65/87 was not available; that SSI exemption was not available as brand name of S. Kumar "S. Kumar a Love Touch" is used.

Further he held that dispute before me pertains to the goods manufactured by them during Oct' 89 to June 94 wherein the party has specifically admitted that the knitted fabrics after cutting into required length are subjected to hemming at ends so that articles are ready for use. The Ld. Commissioner passed the following order

"40. Show Cause Notice No. V(63) 15-1/94/Adj dt 16/20.9.94

i) Central Excise duty amounting to Rs. 54,53,397.60 payable on towel valued Rs. 3.97,19,295.92 cleared without payment of duty during the period Oct 89 to March'94 is confirmed for recovery under Rule 9 (2) of the Central Excise Rules, 1944 read with proviso to Section 11A (1) of Central Excise Act, 44.

ii) 31989 towels valued Rs. 2,28,546 seized on 8.4.94 are also I table for confiscation, however, since these goods are released provisionally on execution on B.II Bone for Rs. 2,2