2007 (2) TMI 7 - AT - Central Excise

Manufacture Alleged that appellant manufacturing product falls under sub-heading 1701.39 of CET and accordingly entitle for payment of excise duty, interest and penalty After considering details substantially relief allowed to appellant

Summary

Issues involved:
1. Whether the activity of converting sugar into Big Crystal Sugar, Khadi Sugar, and Bura Sugar amounts to manufacture under the Central Excise Act.
2. Eligibility of the assessee for Cenvat credit on duty paid sugar.
3. Leviability of sugar cess on the disputed products.
4. Whether the demand is partly barred by limitation.
5. Availability of the benefit of cum duty price to the assessee.

Analysis:
1. The Tribunal held that the conversion of sugar into Big Crystal Sugar, Khadi Sugar, and Bura Sugar constitutes manufacturing under the Central Excise Act based on precedents like Navbharat Industries v. CCE and DCM Shriram Industries v. CCE. The goods were classified under CET sub-heading 1701.39, and the assessee's argument against excisability was rejected.
2. The Commissioner denied Cenvat credit to the assessee due to lack of evidence regarding duty paid on inputs. However, the Tribunal directed verification of input invoices and extension of credit. The department's acknowledgment of sugar use in the final products supported the allowance of credit.
3. The issue of sugar cess leviability on Khadi Sugar was remanded to the Commissioner for a fresh decision as the manufacturing process was disputed by the assessee.
4. The demand period from 1998-99 to June 2003 was deemed not barred by limitation. The assessee's belief that their process did not amount to manufacture was deemed untenable, leading to the invocation of a longer limitation period due to suppression of manufacturing activity.
5. The benefit of cum duty price was to be extended to the assessee, requiring a reworking of duty demand. The issue was remanded for duty re-computation. Penalties on the firm were sustained, but the quantum was to be determined after considering Cenvat credit and cum duty price benefits. Penalties on partners were set aside due to the absence of liability for confiscation. The appeal of the assessee firm was partly allowed, and the appeals of the partners were allowed in full.