COMMISSIONER OF CUSTOMS, CENTRAL EXCISE & SERVICE TAX, RAJKOTversusNARSIBHAI KARAMSIBHAI GAJERA & ORS.

                [2025] 12 S.C.R. 281 : 2025 INSC 1374

           Commissioner of Customs, Central Excise &
                      Service Tax, Rajkot
                               v.
              Narsibhai Karamsibhai Gajera & Ors.
                  (Civil Appeal No(s). 3405-3407 of 2012)
                              02 December 2025
                 [Pamidighantam Sri Narasimha and
                      Atul S. Chandurkar,* JJ.]


                            Issue for Consideration
       Whether the CESTAT fell in error while coming to the conclusion
       that the conversion of grey fabrics to cotton fabrics did not include
       an integral process of stentering undertaken with the aid of power
       and thus the benefit of the Exemption Notification was available
       to Unit No.1. Whether the Order-in-Original rightly considers the
       entire process of manufacture which is conversion of grey fabrics
       into cotton fabrics for being cleared by Unit No.1 as one and
       fastening liability on it.

                                   Headnotes†
       Central Excise Act, 1944 – ss.11AB, 11AC, 35-L(b) –
       Appellant’s case that on the basis of information received
       by its intelligence agency Unit No.1 and Unit No.2 were
       processing cotton fabrics with the aid of power but without
       following any of the procedures laid down under the Act of
       1944 as well as the Rules framed thereunder – After taking
       a stock and recording the statements of the partners of Unit
       Nos.1 and 2 along with other employees of both the Units,
       the Commissioner, Customs and Central Excise issued show
       cause notice dated 14.07.2003 on the premise that both the
       Units were not entitled to exemption from paying customs
       duty – He made a demand of excise duty u/s.11-A(1), interest
       on the amount of duty u/s.11AB and penalty u/s.11AC of
       the Act of 1944 – The CESTAT set aside the order of the
       Commissioner – Correctness:




* Author
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       Held: This Court is of the considered view that the CESTAT fell in
       error while coming to the conclusion that the conversion of grey
       fabrics to cotton fabrics did not include an integral process of
       stentering undertaken with the aid of power and thus the benefit
       of the Exemption Notification was available to Unit No.1 – In the
       present case, the show cause notice indicates that Unit No.1
       was receiving grey fabrics which were thereafter bleached and
       mercerized at the said Unit – The fabric in wet condition was then
       shifted to Unit No.2 and subjected to squeezing and stentering – The
       dry fabrics were thereafter returned to Unit No.1 where they were
       bailed and packed – It was thereafter that the cotton fabrics were
       finally cleared – The CESTAT misdirected itself while emphasizing
       upon the distinct identities of the two Units and in the process
       ignoring the fact that both the Units were together involved in the
       process of manufacture of cotton fabrics from grey fabrics – It
       has come on record that after the grey fabrics were bleached
       and mercerized at Unit No.1, they were taken to Unit No.2 which
       was an adjoining Unit within the same premises – After the wet
       fabrics were subjected to squeezing and stentering at Unit No.2,
       the dry fabrics were brought back to Unit No.1 for being bailed
       and packed – It is clear that the entire activity of undertaking the
       various processes amounted to “manufacture” for the purposes of
       s.2(f) of the Act of 1944 – The CESTAT thus committed an error in
       bifurcating the continuous process of manufacture to come to the
       conclusion that each Unit though undertaking a distinct process
       of manufacture, the activities of one Unit could not be clubbed
       with the other – The Order-in-Original rightly considers the entire
       process of manufacture which is conversion of grey fabrics into
       cotton fabrics for being cleared by Unit No.1 as one and has thus
       fastened liability on it. [Paras 8, 11-13]

                                Case Law Cited
       Steel Authority of India Ltd. v. Directorate General of Anti-Dumping
       & Allied Duties, 2017 INSC 356 : [2017] 6 SCR 598 – held
       inapplicable.
       CCE v. Rajasthan State Chemical Works, 1991 INSC 235 : [1991]
       Supp. 1 SCR 124; Impression Prints v. CCE, 2005 INSC 377 :
       [2005] Supp. 2 SCR 904; Standard Fireworks Industries, Sivakasi
       and Another v. Collector of Central Excise (1987) 1 SCC 600 –
       referred to.
[2025] 12 S.C.R.                                                            283

     Commissioner of Customs, Central Excise & Service Tax, Rajkot v.
                 Narsibhai Karamsibhai Gajera & Ors.

                                   List of Acts
       Central Excise Act, 1944.

                               List of Keywords
       Cotton fabrics; Processing cotton fabrics; Electricity connection;
       Industrial electricity connection; Domestic lighting connection;
       Payment of custom duty; Demand of excise duty under Section
       11-A(1) of Central Excise Act, 1944; Interest on the amount of duty
       under Section 11AB of Central Excise Act, 1944; Penalty under
       Section 11AC of Central Excise Act, 1944; Conversion of grey
       fabrics to cotton fabrics; Aid of power.

                              Case Arising From
       CIVIL APPELLATE JURISDICTION: Civil Appeal No(s).
       3405-3407 of 2012
       From the Judgment and Order dated 05.10.2011 of the Customs,
       Excise and Service Appellate Tribunal, Ahmedabad in Order No.
       A/1692-1694 of 2011

                           Appearances for Parties
       Advs. for the Appellant(s):
       Raghavendra P Shankar, A.S.G., Ms. Nisha Bagchi, Sr. Adv.,
       Gurmeet Singh Makker, Karan Lahiri, Digvijay Dam, B K Satija,
       Gaurang Bhushan.
       Advs. for the Respondent(s):
       Ashish Batra, Wattan Sharma, Nikhil Jain.

                  Judgment / Order of the Supreme Court

                                   Judgment

       Atul S. Chandurkar, J.

1.     This appeal under Section 35-L (b) of the Central Excise Act, 1944
       (for short, “the Act of 1944”) as it stood prior to its amendment
       by Act 25 of 2014 takes exception to the Order dated 5.10.2011
       passed by the Customs, Excise and Service Tax Appellate Tribunal,
       Ahmedabad (for short, “the CESTAT”). By the said order, the CESTAT
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       has set aside the Order-in-Original dated 27.09.2006 passed by
       the Commissioner of Customs and has discharged the show cause
       notice dated 14.07.2003 that was issued to the respondent Nos. 2
       and 3 herein.
2.     It is the case of the appellant that on the basis of information
       received by its intelligence agency, Bhagyalaxmi Processor Industry
       (hereinafter, Unit No.1) and Famous Textile Packers (hereinafter,
       Unit No.2) were processing cotton fabrics with the aid of power but
       without following any of the procedures laid down under the Act
       of 1944 as well as the Rules framed thereunder. The preventive
       staff carried out a search of both the Units on 21.01.2003 and
       executed a panchnama. It was noted that the factory premises
       of both the Units were situated in a common premises within the
       same compound. Both the Units were having industrial electricity
       connection as well domestic lighting connection. In Unit No.1, a bail
       packing machine with an electric motor, a mercerizing machine as
       well as bleaching machinery were found installed. In the premises
       of Unit No.2, a squeezing machine with electric motor as well as a
       stentering machine fitted with oil engine and driers operated with the
       aid of electric power were found. In the electric room, there were
       five electric meters of which two electric meters were for industrial
       connection, two other meters were for domestic lighting purposes
       while one meter was for the diesel generator set. After taking a stock
       and recording the statements of the partners of Unit Nos.1 and 2
       along with other employees of both the Units, the Commissioner,
       Customs and Central Excise issued show cause notice dated
       14.07.2003 on the premise that both the Units were not entitled to
       exemption from paying customs duty. He made a demand of excise
       duty under Section 11-A(1), interest on the amount of duty under
       Section 11 A B and penalty under Section 11 A C of the Act of 1944.
       Both the Units were called upon to submit their reply to the same.
3.     Reply to the show cause notice was submitted on 15.12.2005
       denying the contents thereof. It was asserted that cotton fabrics were
       being processed without the aid of any power and hence the Units
       were entitled to exemption in view of Entry No.106 of Notification
       No.5/98-CE. The Commissioner of Central Excise considered the
       entire material and vide Order dated 29.07.2004 held that both the
[2025] 12 S.C.R.                                                         285

     Commissioner of Customs, Central Excise & Service Tax, Rajkot v.
                 Narsibhai Karamsibhai Gajera & Ors.

       Units were jointly and severally liable to pay the amount of duty
       with interest as well as penalty under the Act of 1944.
       The said Units being aggrieved by the aforesaid order preferred an
       appeal before the CESTAT. Vide its order dated 01.07.2005, the
       CESTAT held that the joint and several liability of each Unit could
       not have been fixed. It therefore set aside the Order-in-Original dated
       29.07.2004 and remanded the proceedings to the Commissioner
       for reconsideration.
4.     After remand, the Commissioner, Central Excise reconsidered the
       entire material. After assessing the evidence on record, he held that
       the statements recorded on 21.01.2003 were sought to be retracted
       by the partners of Unit Nos.1 and 2 after a period of almost six
       months. There was no protest lodged by the noticees immediately
       after the said statements were recorded and hence the retraction
       was by way of an afterthought. He further found that the presence
       of electric motors had been noted in the panchnama and that there
       had been high consumption of electricity and fuel by Unit No.1.
       There was no explanation furnished by Unit No.1 in that regard. It
       was thus held that Unit No.1 was receiving grey cotton fabrics for
       processing. The said fabrics were being bleached and mercerized
       by Unit No.1 with the aid of power. The mercerized and bleached
       fabrics in wet condition were transferred to Unit No.2 where the
       fabrics were squeezed for removing extra water and thereafter
       were processed for stentering. Thereafter, the fabrics were again
       brought back to the premises of Unit No.1 for bailing/folding on the
       machines installed at Unit No.1 that was operated with the aid of
       electric motor. On the completion of this process, the fabrics were
       packed and returned to the customers. Since the entire process
       from receiving the fabrics till their bailing/folding was a continuous
       process, the same was completed with the aid of electricity. Hence,
       the Units were not entitled to claim any exemption under the said
       Notification. The liability to pay duty on the finished fabrics while
       removing the same after the process of bailing and folding was
       of Unit No.1. The show cause notice was accordingly adjudicated
       against Unit No.1 and the demand as made therein was confirmed
       against Unit No.1. The Commissioner also imposed penalty on it
       under Section 11 AC of the Act of 1944.
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5.     Both the Units being aggrieved by the said adjudication again
       approached the CESTAT by filing two appeals. Both the appeals were
       heard together and the CESTAT by its judgment dated 28.09.2011
       proceeded to hold that when the wet fabrics were cleared from Unit
       No.1 and sent to Unit No.2, the said activity was non-excisable. It
       further held that distinct activities of mercerizing and bleaching were
       being carried out at Unit No.1 while the activities of stentering and
       hydro extraction/ drier was carried out at Unit No.2. Both the Units
       were distinct partnership concerns and the clubbing of their activities
       was not justified. It therefore held that the finding recorded by the
       Commissioner that the processes undertaken at Unit Nos.1 and 2
       were liable to be clubbed for deciding accessibility and liability of Unit
       No.1 to pay duty was incorrect. It further held that the subsequent
       affidavits retracting the statements made during the panchnama
       ought to have been taken into consideration. It thereafter held that
       the allegation that there was usage of power during the process of
       mercerizing at Unit No.1 was incorrect. On that basis, the CESTAT
       proceeded to set aside the order of the Commissioner and allowed
       both the appeals. Being aggrieved, the Commissioner of Customs,
       Central Excise and Service Tax has come up in appeal.
6.     Mr. Raghavendra P. Shankar, learned Additional Solicitor General
       appearing for the appellant submitted that the CESTAT misread
       Entry No.106 of the Exemption Notification dated 02.06.1998 for
       arriving at the conclusion that grey fabrics had been processed to
       cotton fabrics without the aid of power by Unit No.1. According to
       him, the grey fabrics were initially bleached and mercerized at Unit
       No.1. Thereafter the fabrics in wet condition were shifted to Unit
       No.2 and subjected to squeezing and stentering. The dry fabrics
       were thereafter returned to Unit No.1 where they were bailed and
       packed after which the cotton fabrics were cleared. The conversion
       of grey fabrics to a finished product was subjected to “process” with
       the aid of power. Referring to the decisions in CCE Vs. Rajasthan
       State Chemical Works1 and Impression Prints Vs. CCE2, it was
       submitted that if there was use of any power at any of the numerous



1    1991 INSC 235
2    2005 INSC 377
[2025] 12 S.C.R.                                                        287

     Commissioner of Customs, Central Excise & Service Tax, Rajkot v.
                 Narsibhai Karamsibhai Gajera & Ors.

       processes that were required to convert the raw material into a
       finished article, the manufacture would be with the use of power.
       Each of the activities carried out at Unit Nos.1 and 2 were integrally
       connected leading to the final product and hence it could not be said
       that the cotton fabrics were manufactured without the aid of power.
       The CESTAT had failed to be taken into consideration the various
       processes undertaken on the initial grey fabrics till the time of the
       final product was prepared. Referring to the Panchnama that was
       prepared by the Inspection team, it was submitted that the use of
       power during the course of stentering was clearly admitted. Even
       the CESTAT did not disturb the said finding. However, by wrongfully
       holding that the process undertaken at Unit No.2 was not connected
       to the process undertaken at Unit No.1, it proceeded to arrive at a
       wrong conclusion. It was thus clear that the benefit of exemption was
       not available specially when the process of stentering was integrally
       connected with the manufacture of cotton fabrics from grey fabrics.
       As the conclusion drawn by the CESTAT was contrary to the legal
       position settled by this Court, it could not be said that it had taken
       a possible view of the matter. A case was therefore made out to
       interfere with the findings recorded by the CESTAT. Reliance was
       also placed on the decision in Standard Fireworks Industries,
       Sivakasi and another Vs. Collector of Central Excise3. It was
       thus urged that the order passed by the CESTAT be set aside and
       the Order-in-Original passed by the Commissioner be restored.
7.     On the other hand, Mr. Ashish Batra, learned counsel for the
       respondents supported the order passed by the CESTAT and
       submitted that the benefit of the Exemption Notification dated
       02.06.1998 had been rightly granted to Unit No.1. He submitted
       that Unit No.1 and Unit No.2 were independent in their activities
       and were merely carrying out respective job works. There was no
       unity of ownership of the two Units. Though show cause notice was
       issued to both the Units, the Commissioner proceeded to uphold
       the demand only against Unit No.1. Even if it was presumed that
       there was use of power in the process of stentering at Unit No.2,
       as the show cause notice against it had been dropped, the activities


3     (1987) 1 SCC 600
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       in question carried out at Unit Nos.1 and 2 could not have been
       clubbed. The CESTAT rightly held that insofar as Unit No.1 was
       concerned, there was no use of power. It was then submitted that
       the statements alleged to have been recorded during the course
       of recording the Panchnama had been retracted by filing affidavits.
       The CESTAT rightly ignored the earlier statements and recorded
       a correct finding that there was no use of power during the entire
       process of manufacture. The CESTAT being the final fact finding
       authority and the conclusion recorded by it being one based on the
       material on record, there was no case for interference with the said
       findings. To substantiate this contention, the learned counsel relied
       upon the decision in Steel Authority of India Ltd. Vs. Directorate
       General of Anti-Dumping & Allied Duties4. It was thus submitted
       that there was no merit in the appeal as filed and the same was
       liable to be dismissed.
8.     We have heard the learned counsel for the parties at length and
       with their assistance we have perused the documentary material
       on record. Having given due consideration to the same, we are of
       the considered view that the CESTAT fell in error while coming to
       the conclusion that the conversion of grey fabrics to cotton fabrics
       did not include an integral process of stentering undertaken with
       the aid of power and thus the benefit of the Exemption Notification
       was available to Unit No.1.
9.     At the outset, it would be necessary to refer to the definition of the
       expression “manufacture” as defined in Section 2(f) of the Act of
       1944 prior to its amendment by Act 18 of 2017. The same reads
       as under:-
             “2(f) ‘Manufacture’ includes any process:-
             (i) incidental or ancillary to the completion of a manufactured
             product;
             (ii) which is specified in relation to any goods in the section
             or Chapter notes of the First Schedule to the Central
             Excise Tariff Act, 1985 as amounting to manufacture; or



4    2017 INSC 356
[2025] 12 S.C.R.                                                          289

  Commissioner of Customs, Central Excise & Service Tax, Rajkot v.
              Narsibhai Karamsibhai Gajera & Ors.

          (iii) which in relation to the goods specified in the Third
          Schedule, involves packing or repacking of such goods
          in a unit container or labelling or re-labelling of containers
          including the declaration or alteration of retail sale price
          on it or adoption of any other treatment on the goods to
          render the product marketable to the consumer;
          and the word “manufacture” shall be construed accordingly
          and shall include not only a person who employs hired
          labour in the production or manufacture of excisable goods,
          but also any person who engages in their production or
          manufacture on his own account.”
     Since, Unit No.1 seeks the benefit of Notification No.5/1998-CE and
     especially Entry No.106 therein, the same is reproduced hereunder:-

      S.No.    Chapter or     Description of goods       Rate    Conditions
               heading
               no. or sub
               heading no.
      106.     52.07,         Cotton fabrics processed
               52.08 or       without the aid of power
               52.09          or steam Explanation –
                              For the purpose of the
                              cotton fabrics subjected
                              to the process of colour
                              fixation by passing
                              steam over such fabrics
                              shall be deemed to have
                              been processed without
                              the aid of steam

10. Before adverting to the factual aspects, it would be necessary to
    bear in mind the settled legal position on the aspect “manufacture”
    and “process” in the context of Exemption notifications under the Act
    of 1944. In Standard Fireworks Industries, Sivakasi and another
    (supra), the manufacturers of fireworks sought to claim refund of
    duty on the ground that they were exempted from its payment as
    the manufacturing process was carried out without the aid of power.
    It was found that during the course of manufacture of fireworks, no
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       power was used. Power was however used for the shredding of
       paper and cutting of steel wires. The steel wires as well as the paper
       were part of the manufacturing process and used while preparing
       the fireworks. In that context, this Court held that the Exemption
       Notification was applicable only when in relation to the manufacture
       of the goods, no process was ordinarily carried on with the aid of
       power. The cutting of the steel wires and the treatment of paper
       were processes adopted during the manufacture of the fireworks.
       These processes were carried on with the aid of power, though
       outside the factory. On that basis the appellants therein were held
       not entitled to the exemption from payment of duty.
       A Bench of three learned Judges in Collector of Central Excise
       Jaipur (supra) considered a similar Exemption Notification that
       granted exemption when no process of manufacture was carried on
       with the aid of power. Therein, the issue pertained to the process
       of manufacture of common salt from brine in the salt pans. During
       the course of manufacture, brine was pumped into the salt pans
       using diesel pumps. After referring to the definition of the expression
       “manufacture” under the Act of 1944, it was observed as under:-
            “13. Manufacture thus involves series of processes.
            Process in manufacture or in relation to manufacture
            implies not only the production but the various stages
            through which the raw material is subjected to change
            by different operations. It is the cumulative effect of the
            various processes to which the raw material is subjected
            to (sic that the) manufactured product emerges. Therefore,
            each step towards such production would be a process in
            relation to the manufacture. Where any particular process
            is so integrally connected with the ultimate production of
            goods that but for that process manufacture or processing
            of goods would be impossible or commercially inexpedient,
            that process is one in relation to the manufacture.
            14. The natural meaning of the word ‘process’ is a mode
            of treatment of certain materials in order to produce a
            good result, a species of activity performed on the subject
            matter in order to transform or reduce it to a certain stage.
            According to Oxford Dictionary one of the meanings of
[2025] 12 S.C.R.                                                         291

  Commissioner of Customs, Central Excise & Service Tax, Rajkot v.
              Narsibhai Karamsibhai Gajera & Ors.

          the word ‘process’ is “a continuous and regular action
          or succession of actions taking place or carried on in a
          definite manner and leading to the accomplishment of
          some result”. The activity contemplated by the definition
          is perfectly general requiring only the continuous or
          quick succession. It is not one of the requisites that the
          activity should involve some operation on some material
          in order to (sic effect) its conversion to some particular
          stage. There is nothing in the natural meaning of the word
          ‘process’ to exclude its application to handling. There
          may be a process which consists only in handling and
          there may be a process which involves no handling or not
          merely handling but use or also use. It may be a process
          involving the handling of the material and it need not be
          a process involving the use of material. The activity may
          be subordinate but one in relation to the further process
          of manufacture.
          20. A process is a manufacturing process when it brings
          out a complete transformation for the whole components
          so as to produce a commercially different article or a
          commodity. But, that process itself may consist of several
          processes which may or may not bring about any change
          at every intermediate stage. But the activities or the
          operations may be so integrally connected that the final
          result is the production of a commercially different article.
          Therefore, any activity or operation which is the essential
          requirement and is so related to the further operations for
          the end result would also be a process in or in relation to
          manufacture to attract the relevant clause in the exemption
          notification. In our view, the word ‘process’ in the context
          in which it appears in the aforesaid notification includes
          an operation or activity in relation to manufacture.”
     The decision in Standard Fireworks Industries, Sivakasi and
     another (supra) was referred to and a similar view of the matter
     was taken.
11. From the aforesaid decisions, it can be seen that manufacture has
    been held to involve a series of distinct processes. It is the cumulative
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       effect of the various processes to which the raw material is subjected
       after which the manufactured product emerges. The requirement is
       that the individual process should be integrally connected with each
       other leading to the ultimate final product. But for each individual
       process, the manufacture or processing of the goods would be
       impossible. A particular activity may be subordinate but related to the
       further process of manufacture. Manufacture thus is the end result
       of one or more processes through which the original commodity
       passes and then becomes the final product.
       In the present case, the show cause notice indicates that Unit No.1
       was receiving grey fabrics which were thereafter bleached and
       mercerized at the said Unit. The fabric in wet condition was then
       shifted to Unit No.2 and subjected to squeezing and stentering. The
       dry fabrics were thereafter returned to Unit No.1 where they were
       bailed and packed. It was thereafter that the cotton fabrics were
       finally cleared. The CESTAT while allowing the appeals preferred
       by both the Units came to the conclusion that the distinct processes
       carried out at Unit Nos.1 and 2 could not have been clubbed together.
       It held that both the Units were independently working on their
       own account and thus their activities were not liable to be clubbed
       together. For reaching that conclusion, the CESTAT was impressed
       by the fact that there was no commonality between the partners
       of both the Units, the machinery employed in both the Units were
       different, the job work bills were separately raised by both the Units
       and that the payments were separately made by them.
12. In our view, the CESTAT misdirected itself while emphasizing upon
    the distinct identities of the two Units and in the process ignoring
    the fact that both the Units were together involved in the process
    of manufacture of cotton fabrics from grey fabrics. It has come on
    record that after the grey fabrics were bleached and mercerized at
    Unit No.1, they were taken to Unit No.2 which was an adjoining Unit
    within the same premises. After the wet fabrics were subjected to
    squeezing and stentering at Unit No.2, the dry fabrics were brought
    back to Unit No.1 for being bailed and packed. When all these
    activities commencing from bleaching and mercerizing thereafter
    leading to squeezing and stentering and culminating into the product
    being bailed and packed being integral processes in the conversion
[2025] 12 S.C.R.                                                        293

  Commissioner of Customs, Central Excise & Service Tax, Rajkot v.
              Narsibhai Karamsibhai Gajera & Ors.

     of grey fabrics into cotton fabrics, the fact that the Units undertaking
     these processes were exclusive to each other would hardly make
     any difference. What is to be seen is whether the distinct processes
     undertaken by the two Units formed part of a continuous chain that
     culminated into the final product or not? If the various processes
     were so interlinked with each other that the end product in the form
     of cotton fabrics could not be brought about without undertaking
     each individual process to which the final product was subjected to,
     it would be clear that the entire activity of undertaking the various
     processes amounted to “manufacture” for the purposes of Section
     2(f) of the Act of 1944. Viewed in this context, it is clear that Unit
     No.1 received grey fabrics which were thereafter subjected to various
     processes by Unit Nos.1 and 2 cumulatively resulting in the final
     product which was then cleared by Unit No.1.
13. The CESTAT while considering the aspect of use of power by
    the two Units has observed that the process of stentering at Unit
    No.2 with the use of power would not make any difference as the
    demand had not been confirmed against it. This approach ignores
    the fact that the entire process of manufacture has to be taken into
    consideration with the end product falling into the hands of Unit
    No.1 after it was subjected to an integrated process at Unit No.2.
    The demand against Unit No.2 not being confirmed would not be
    relevant in these facts when it is clear that the process of manufacture
    was cumulatively undertaken at Unit Nos.1 and 2 and that the final
    product was being cleared from Unit No.1. We therefore find that
    even on this count, the order passed by the Commissioner did not
    call for any interference as it had taken a correct view on the basis
    of the material on record. The CESTAT thus committed an error in
    bifurcating the continuous process of manufacture to come to the
    conclusion that each Unit though undertaking a distinct process of
    manufacture, the activities of one Unit could not be clubbed with the
    other. The Order-in-Original rightly considers the entire process of
    manufacture which is conversion of grey fabrics into cotton fabrics
    for being cleared by Unit No.1 as one and has thus fastened liability
    on it. A case for interference under Section 35-L (b) of the Act of
    1944 has thus been made out. In these facts therefore the ratio of
    the decision in Steel Authority of India (supra) cannot be made
    applicable to the case in hand.
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14. For the aforesaid reasons, the order passed by the CESTAT dated
    05.10.2011 is quashed and set aside and the Order-in-Original
    passed by the Commissioner, Central Excise dated 27.09.2006
    stands restored. The Civil Appeal is thus allowed leaving the parties
    to bear their own costs.


       Result of the case: Appeal allowed.




       †
           Headnotes prepared by: Ankit Gyan