2002 (8) TMI 662 - AT - Central Excise

Manufacture - Appeal to Appellate Tribunal - New plea - Value of clearances - Computation of

Summary

Issues:
1. Duty demand on the manufacture of liquid gum and its use in the production of corrugated boxes.
2. Duty demand on paper cutting waste generated during the manufacture of corrugated boxes.
3. Duty demand on the inclusion of the value of clearances of liquid gum in exemption slabs.

Analysis:

Issue 1: Duty demand on liquid gum production
The appellant company, engaged in manufacturing corrugated boxes, faced duty demand on producing liquid gum from gum powder and using it in box production. The company argued that converting gum powder to liquid gum did not constitute manufacturing under Section 2(f) of the Act. The Tribunal agreed, citing precedents like N.S. Corporation v. CCE and others. It emphasized that mere change in form without creating a new marketable product doesn't amount to manufacturing. The Tribunal rejected the Revenue's argument invoking Chapter Note 3 of Chapter 35, stating that the powder itself was marketable, so adding water didn't render it marketable. Consequently, the duty demand on liquid gum production was deemed not maintainable.

Issue 2: Duty demand on paper cutting waste
The duty demand on paper cutting waste generated during corrugated box manufacture was also contested. The Tribunal ruled that this waste generation did not constitute manufacturing by the company, as they were not independently engaged in producing the waste. Hence, the duty demand on paper cutting waste was deemed legally unsustainable.

Issue 3: Duty demand on inclusion of liquid gum clearances
Regarding the duty demand on including the value of liquid gum clearances in exemption slabs, the Tribunal found it untenable. Since no duty demand was legally sustainable against the company, the penalty under Rule 209A against the Manager (appellant No. 2) was also invalidated. Consequently, the impugned order of the Commissioner was set aside, and the appeals of both appellants were allowed with any consequential relief permissible under the law.

This judgment highlights the importance of distinguishing manufacturing activities and the criteria for duty liability under the law. The Tribunal's detailed analysis of each issue provides clarity on the legal principles governing excise duty demands in cases involving production processes and waste generation in manufacturing operations.