1999 (9) TMI 874 - AT - Central Excise

Issues Involved:
1. Whether the operation of putting duty-paid inked ribbons into spools/cassettes/cartridges amounted to manufacture.
2. Whether the extended period of limitation under the proviso to Section 11A(1) of the Central Excises & Salt Act was invocable.
3. Whether the goods seized were liable to confiscation and whether penal action was justified.

Detailed Analysis:

1. Whether the operation of putting duty-paid inked ribbons into spools/cassettes/cartridges amounted to manufacture:
The primary issue was whether the process undertaken by M/s. Magna Ink Limited of putting duty-paid inked ribbons into spools/cassettes/cartridges constituted "manufacture" under Section 2(f) of the Central Excises & Salt Act, 1944.

The Commissioner of Central Excise initially held that this process amounted to manufacture, relying on the Supreme Court's decision in the case of M/s. Dipen Textiles (P) Limited v. Collector of Central Excise and other precedents. However, the Tribunal disagreed, noting that the inked ribbon did not undergo any change in physical or chemical characteristics during the process and that the end use of the product remained the same. The Tribunal found that the process did not result in a new product with a different name and character. Therefore, it did not amount to manufacture as defined under Section 2(f) of the Central Excises & Salt Act, 1944.

The Tribunal also considered the relevant Tariff Entry 96.12, which includes "Typewriter or similar ribbons inked or otherwise prepared for giving impressions, whether or not on spools or in cartridges." The Tribunal interpreted the phrase "whether or not" as merely descriptive, indicating that the goods were dutiable regardless of whether they were on spools or in cartridges. This interpretation was supported by the minority view in the case of M/s. Prabhat Associates and Others v. Collector of Central Excise, Bangalore, which was upheld by the Supreme Court in M/s. Prabhat Sound Studios v. Additional Collector of Central Excise.

2. Whether the extended period of limitation under the proviso to Section 11A(1) of the Central Excises & Salt Act was invocable:
The Commissioner had issued show cause notices to M/s. Magna Ink Limited and M/s. Kores (India) Limited, alleging suppression of facts with intent to evade duty, thereby invoking the extended period of limitation. However, the Tribunal found that the correspondence between the parties and the Department indicated that there was no suppression of facts. Therefore, the extended period of limitation was not applicable.

The Tribunal upheld the Commissioner's decision to drop the demand for the period up to 6-6-1993, as the extended period of limitation could not be invoked. Consequently, the demand for the period from 9-8-1990 to 6-6-1993 was not sustainable.

3. Whether the goods seized were liable to confiscation and whether penal action was justified:
The Commissioner had proposed confiscation of the seized goods and penal action under various provisions of the Central Excise Rules, 1944. However, since the Tribunal concluded that the process undertaken by M/s. Magna Ink Limited did not amount to manufacture, the goods were not liable to Central Excise duty. Consequently, the basis for confiscation and penal action was invalidated.

Conclusion:
The Tribunal allowed the appeals filed by the assessee-appellants, holding that the process of putting duty-paid inked ribbons into spools/cassettes/cartridges did not amount to manufacture. The Tribunal also found that the extended period of limitation was not applicable, and the goods seized were not liable to confiscation. The appeals by the Revenue were rejected as inconsequential.

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