2005 (2) TMI 713 - AT - Central Excise

Issues Involved:
1. Demand of Central Excise duty on imported Ready Made Garments (RMG).
2. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.
3. Imposition of penalty under Rule 25 of the Central Excise Rules.
4. Payment of interest under Section 11AB of the Central Excise Act, 1944.
5. Whether the activities undertaken on imported RMG amount to "manufacture" as per Chapter Note 4 to Chapter 62 of the Central Excise Tariff Act, 1985.
6. Invocation of the larger period of limitation under the proviso to Section 11A(1) of the Central Excise Act, 1944.
7. Determination of the liability of the job worker versus the appellant.

Detailed Analysis:

1. Demand of Central Excise Duty on Imported RMG:
The Commissioner of Central Excise, Bangalore, demanded duty of Rs. 2,08,47,542/- under the proviso to Section 11A(1) of the Central Excise Act, 1944, for the period from 1-5-2001 to 31-1-2003. The duty was demanded on the grounds that the imported RMG underwent 'refinishing work' which amounted to manufacture as per Chapter Note 4 to Chapter 62 of the Central Excise Tariff Act, 1985.

2. Imposition of Penalty under Section 11AC:
A penalty equivalent to the duty amount of Rs. 2,08,47,542/- was imposed under Section 11AC of the Central Excise Act, 1944. This penalty was based on the alleged suppression of facts by the appellant with the intention of evading payment of Central Excise duty.

3. Imposition of Penalty under Rule 25:
An additional penalty of Rs. 21,00,000/- was imposed under Rule 25 of the Central Excise (No. 2) Rules, 2001/Central Excise Rules, 2002. This penalty was also related to the alleged non-compliance with the provisions of the Central Excise Act and Rules.

4. Payment of Interest under Section 11AB:
The order also included a directive to pay interest under Section 11AB of the Central Excise Act, 1944, on the duty amount demanded.

5. Whether Activities Amount to "Manufacture":
The core issue was whether the activities undertaken on the imported RMG, such as affixing brand labels, repacking, and other refinishing work, amounted to "manufacture" under Chapter Note 4 to Chapter 62. The Note specifies that affixing a brand name, labeling, relabeling, repacking from bulk to retail packs, or any treatment to render the product marketable to the consumer shall amount to manufacture. The Tribunal emphasized that this Note is an artificial definition and must be construed strictly, relying on various case laws to support this interpretation.

6. Invocation of Larger Period of Limitation:
The demand was confirmed by invoking the larger period of limitation under the proviso to Section 11A(1) of the Central Excise Act, 1944, on the grounds of suppression of facts by the appellant.

7. Determination of Liability of Job Worker vs. Appellant:
The Tribunal noted that many of the processes deemed to be manufacture were conducted at the job workers' premises. It is settled law that the job worker, being the manufacturer, is liable to discharge the duty. The appellant would only be liable for duty on RMG processed within their premises if it is established that such activities amount to manufacture.

Conclusion and Remand:
The Tribunal set aside the impugned order and remanded the matter back to the Commissioner for a de novo determination. The Commissioner was directed to re-examine the applicability of Chapter Note 4, the actual processes undertaken, and the consequent duty and penalties. The Tribunal clarified that any demands on goods manufactured by job workers could not be confirmed on the appellant. The issues of suppression of facts and imposition of penalties were left open for redetermination in the de novo proceedings.

Disposition:
The appeals were disposed of with the direction for a de novo determination by the Commissioner, considering the findings and submissions detailed in the judgment.

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