2006 (6) TMI 301 - AT - Central Excise

Summary

Issues:
Company and Managing Director aggrieved by Commissioner's order imposing Central Excise duty, penalty, interest, and penalty on Managing Director. Whether slitting and cutting of duty paid plastic laminated films amount to manufacture under Central Excise Act. Whether activity of cutting/slitting covered under "incidental to manufacture." Imposition of penalty under Rule 173Q(1). Admissibility of Modvat credit. Whether demand within time limit. Referral of issue to Larger Bench for determination of "manufacture."

Analysis:
The appeals were filed by the company and its Managing Director against the Commissioner's order holding them liable for Central Excise duty, penalty, and interest. The company was engaged in manufacturing plastic laminated film and pouches at their factory and started a processing unit in Silvasa. The jurisdictional officers alleged that slitting and cutting of duty paid films at Silvasa amounted to manufacture under the Central Excise Act. The Commissioner upheld the charges based on various grounds, including the activity being "incidental to manufacture" and non-compliance with registration and C.Ex. procedure.

The grounds taken in the appeal included arguments that slitting did not amount to manufacture, duty neutrality, availability of Modvat credit, and non-imposition of penalty due to lack of mens rea. The company contended that the duty paid at the Mahad factory was available as credit at the Silvasa unit, indicating no intention to evade duty. The appeal also raised issues regarding the admissibility of duty credit on received jumbo rolls and the sustainability of the demand on merits.

The judgment referred to various legal precedents and instructions to support the Commissioner's decision, emphasizing that the process of manufacture may evolve with technological advancements. The Court highlighted that if slitting resulted in obtaining rolls intended for consumer use, it constituted manufacture. The issue was deemed significant enough to warrant referral to a Larger Bench for a determination on whether the slitting activity should be considered excisable.

In conclusion, the matter was referred to the Larger Bench for a comprehensive examination of the "manufacture" aspect in the context of slitting jumbo rolls. The decision underscored the need for a detailed analysis considering the evolving nature of manufacturing processes and the distinct commercial identity of the resulting goods.