2002 (12) TMI 519 - AT - Central Excise

Summary

Issues Involved:
1. Whether the process of slitting HR, CR, and SS coils amounts to manufacture under the Central Excise Act.
2. Interpretation of the term "manufacture" as defined in Section 2(f) of the Central Excise Act.
3. Validity and sufficiency of the Show Cause Notices.
4. Applicability of penalties in cases of classification disputes.
5. Limitation period for issuing Show Cause Notices.

Issue-wise Detailed Analysis:

1. Whether the process of slitting HR, CR, and SS coils amounts to manufacture under the Central Excise Act:
The appellant argued that slitting HR, CR, and SS coils, which merely reduces the width without changing the name, characteristics, or use of the product, does not constitute manufacture. The slit products remain flat rolled products, and no new product with a distinct name, character, or use emerges. The revenue, through a circular dated 7-9-2001, acknowledged that slitting coils of more than 600 mm width does not amount to manufacture. The same logic should apply to coils of less than 600 mm width.

2. Interpretation of the term "manufacture" as defined in Section 2(f) of the Central Excise Act:
The appellant referenced the Supreme Court decision in Union of India v. Delhi Cloth and General Mills Co. Ltd., which stated that manufacture implies bringing into existence a new substance with a distinct name, character, or use. The process of slitting does not meet this criterion as it does not result in a new product. The appellant supported this argument with various case laws, including Prabhat Sound Studios v. Additional Collector of Central Excise and UOI v. J.G. Glass Industries Ltd., where similar processes were not considered manufacture.

3. Validity and sufficiency of the Show Cause Notices:
The appellant contended that the Show Cause Notices were vague, failing to specify the raw materials, finished products, and how the conversion amounts to manufacture. The Tribunal noted that the notices lacked details such as the specifications of the coils, the quantity of raw material used, and the classification of the end-products. This vagueness made it impossible to determine whether a new and separate marketable product had been produced.

4. Applicability of penalties in cases of classification disputes:
The appellant argued that penalties are not leviable in cases where the dispute merely relates to classification issues. The Tribunal agreed, setting aside the penalty imposed, as the primary issue was the classification of the products post-slitting.

5. Limitation period for issuing Show Cause Notices:
The appellant claimed that the Show Cause Notice dated 2-3-1994 was barred by limitation. The Tribunal did not specifically address this point, as the primary reason for setting aside the notices was their vagueness and insufficiency.

Conclusion:
The Tribunal allowed the appeals, setting aside the duty demands and penalties due to the vagueness of the Show Cause Notices. The Tribunal emphasized that for a process to be considered manufacture, it must result in a new product with a distinct name, character, or use, which was not the case with the slitting of HR, CR, and SS coils.