2005 (7) TMI 514 - AT - Central Excise

Summary

Issues:
1. Waiver of pre-deposit and penalty under exemption Notification No. 7/2003.
2. Determination of whether the activity of folding fabric amounts to manufacturing.
3. Eligibility for exemption under Notification No. 35/2003-C.E.

Analysis:

1. Waiver of Pre-deposit and Penalty:
The appellant sought waiver of pre-deposit of Rs. 45,810/- and penalty of Rs. 500 under exemption Notification No. 7/2003. The demands were based on the allegation that the appellant was not entitled to the exemption due to their involvement in the process of calendering. The appellant argued that they were only folding the fabric, similar to ironing, for marketing purposes and not engaging in manufacturing activities. Citing relevant case laws such as Japan Dyeing Works and JCT Ltd., the appellant contended that the folding process did not amount to manufacturing. The Tribunal, after careful consideration, found in favor of the appellant, allowing the stay application and taking up the appeal for disposal.

2. Activity of Folding Fabric and Manufacturing:
Upon examination of the process carried out by the appellants, the Tribunal determined that the activity of folding fabric through grooved rollers was not essential for calendering but for convenience in packing and selling. The Tribunal agreed with the appellant's argument that the folding process did not result in the creation of a new product, as the goods already existed, and the folding was solely for packing purposes. As a result, the Tribunal concluded that the activity of folding fabric did not constitute a manufacturing process and that the appellants were not liable for excise duty under Notification No. 35/2003-C.E. The Tribunal held that since the fabric had not undergone any manufacturing process through folding, the appellants were eligible for the exemption, overturning the impugned order that classified folding as calendering.

3. Eligibility for Exemption under Notification No. 35/2003-C.E.:
The appellants' activity of folding fabric was deemed non-essential for marketing purposes but only for packing and selling convenience. This distinction led the Tribunal to determine that the appellants continued to qualify for the exemption under Notification No. 35/2003-C.E. The Tribunal's decision to allow the stay and appeal with consequential relief was based on the finding that the folding process did not amount to manufacturing and therefore did not disqualify the appellants from the exemption.

In conclusion, the Tribunal's judgment favored the appellant, recognizing that the activity of folding fabric was not a manufacturing process and upheld their eligibility for the exemption under the relevant notifications.