2003 (6) TMI 408 - AT - Central Excise

Issues Involved:
1. Whether slitting and cutting of steel sheets, plastic laminating sheets, and metallized lacquered polyester films amount to manufacture.
2. Classification and excisability of products post slitting and cutting under Central Excise Tariff.
3. Marketability of the resultant products.
4. Application of Board's circular and relevant judicial precedents.
5. Imposition of duty, penalty, and interest under Central Excise Act.

Detailed Analysis:

1. Whether slitting and cutting amount to manufacture:
The primary issue in these appeals is whether the process of slitting and cutting steel sheets, plastic laminating sheets, and metallized lacquered polyester films constitutes "manufacture" under Section 2(f) of the Central Excise Act, 1944. The appellants contended that these activities do not amount to manufacture. However, the adjudicating authority disagreed, holding that the processes result in a commercially distinct commodity, thus amounting to manufacture.

2. Classification and excisability under Central Excise Tariff:
The show cause notice issued to the appellants proposed that the resultant products from slitting and cutting should be classified under different headings of the Central Excise Tariff, thereby making them excisable. For instance, flat-rolled products of iron or non-alloy steel of a width of 600 mm or more, when slit to less than 600 mm, were argued to transform into excisable goods under Heading 72.11, distinct from their original classification under Headings 72.08 or 72.09.

3. Marketability of the resultant products:
The department argued that the resultant products from slitting and cutting have a distinct name, character, and use in the market, thus meeting the criteria of manufacture. However, the appellants countered that there was no loss of identity of the original products and no new distinct product emerged. The Tribunal noted the absence of evidence regarding the marketability and distinct commercial identity of the resultant products in the show cause notice.

4. Application of Board's circular and judicial precedents:
The appellants cited the Board's Circular No. 584/21/01-CX.4, dated 7th September 2001, which stated that slitting and cutting do not amount to manufacture if the resultant coils fall within the same tariff heading. They also referred to judicial precedents such as CCE v. Bemcee Ltd. and CCE v. Markfed Vanaspati & Allied Indus., where similar activities were held not to constitute manufacture. The Tribunal considered these precedents and the Board's circular, emphasizing that the transformation must result in a new and different article with a distinct name, character, or use.

5. Imposition of duty, penalty, and interest:
The Commissioner adjudicated that the appellants were liable to pay duty of Rs. 42,89,48,256/-, imposed an equal amount of penalty under Section 11AC, and ordered the payment of interest under Section 11AB. Additionally, land, building, etc., were confiscated with an option of redemption fine, and a penalty of Rs. 5 crores was imposed on another appellant under Rule 209A of the Central Excise Rules. The Tribunal, however, found that the department failed to provide sufficient evidence to support the classification and marketability of the resultant products as new and distinct commodities.

Conclusion:
The Tribunal concluded that the slitting and cutting of steel sheets, plastic laminating sheets, and metallized lacquered polyester films do not amount to manufacture in the absence of evidence proving the emergence of a new product with a distinct name, character, and use. Consequently, the impugned order was set aside, and the appeals were allowed.

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