2002 (1) TMI 658 - AT - Central Excise

Summary

Issues:
1. Application for waiver of deposit of duty and penalty.
2. Whether the activity amounts to manufacture.
3. Interpretation of conflicting judgments on the activity.
4. Applicability of Modvat credit towards duty payment.
5. Limitation period for duty payment.

Analysis:

1. The case involved an application for the waiver of duty and penalty imposed on the applicant, Vijlal Vithaldas & Sons, for slitting steel sheets in coil form. The duty was demanded based on the finding that the activity amounted to manufacture, and the penalty was imposed for alleged suppression of facts regarding the activity.

2. The key issue revolved around whether the slitting activity constituted manufacture. The applicant relied on a Tribunal stay order and a judgment in Moti Laminates Pvt. Ltd. v. CCE to argue that the mere change in tariff heading does not amount to manufacture. However, the department cited the Supreme Court judgment in Lal Woolen & Silk Mills P. Ltd. v. CCE, which took a different view, considering dyeing of grey yarn as manufacture due to tariff differences.

3. The conflicting views of the Tribunal and the Supreme Court on what constitutes manufacture added complexity to the case. While the Tribunal's previous decisions and the applicant's arguments supported a narrow interpretation, the department's reliance on the Lal Woolen case and the Board's circular created uncertainty.

4. Another aspect was the applicability of Modvat credit towards duty payment. The applicant contended that if the activity was deemed manufacture, they should be allowed to use Modvat credit. The Tribunal agreed, emphasizing that failure to follow Modvat procedure due to a belief that the final product was duty-exempt should not be held against the applicant.

5. Lastly, the issue of limitation arose concerning the duty payment period. The applicant argued that declarations filed since 1988 indicated the activity of coil cutting, suggesting no suppression. The Commissioner's dismissal of this claim was challenged, highlighting discrepancies in the department's handling of information provided by the applicant.

In conclusion, the Tribunal found the case not entirely free from doubt due to conflicting judgments on the manufacturing activity. However, it favored the applicant on the Modvat credit issue and the limitation period, granting an out-of-turn hearing and listing the appeals for further consideration.