2006 (4) TMI 400 - AT - Central Excise

Demand - Limitation - Larger period - Invocation of - Dutiability - Manufacture - Interpretation of Statute - Demand - Manufacture - Demand - Job worker

Issues Involved:
1. Whether the process of decatising attracts Central Excise duty after the budget of 2003.
2. Whether the demands are time-barred.

Detailed Analysis:

Issue 1: Whether the process of decatising attracts Central Excise duty after the budget of 2003

The core issue revolves around whether the process of decatising constitutes a process of manufacture, thereby attracting Central Excise duty. The appellants argued that decatising is akin to blowing, which has been exempted from duty since 1996. They supported their claim with expert opinions, such as the Sasmira report, which equates decatising with blowing. The process involves steam pressing to remove wrinkles, using coal-generated steam, not electricity, and does not result in new goods.

The Tribunal upheld this view, noting that decatising does not create new goods and thus does not qualify as a manufacturing process under Central Excise law. This interpretation aligns with the Supreme Court's ruling in Delhi Cloth and General Mills [1978 E.L.T. J 336 SC], which requires a process to result in new goods to attract duty.

The Tribunal also considered the legislative history and noted that the exemption for blowing was restored by subsequent notifications, indicating a consistent intent to exempt such processes. The Tribunal concluded that the process of decatising is exempt from duty, as clarified by Notification No. 47/02, which has retrospective effect from 1-3-2002.

Issue 2: Whether the demands are time-barred

The appellants contended that the demands were time-barred since the department was aware of their activities, as evidenced by representations made by their associations. The Tribunal examined the Commissioner's findings in OIA No. 112/05 and OIA 148/05, which acknowledged the department's awareness of the non-payment of duty due to ongoing correspondence with the appellants' associations.

The Tribunal emphasized that for the extended period under Proviso to Section 11-A to apply, there must be intentional suppression of facts to evade duty, as established by the Supreme Court in cases like Chemphor Drugs & Liniments [1989 (40) E.L.T. 276 (SC)] and Cosmic Dye Chem [1995 (75) E.L.T. 721 (SC)]. Given the department's knowledge, the Tribunal ruled that there was no suppression of facts, making the extended period inapplicable and rendering the demands time-barred.

Conclusion:

1. Demands are Time-Barred: The Tribunal found that the demands were time-barred due to the department's prior knowledge of the appellants' processes, negating any claim of suppression of facts.

2. Decatising is Exempt from Duty: The Tribunal ruled that decatising is not a process of manufacture and is exempt from duty, supported by expert opinions and the legislative history of exemptions.

3. Clarificatory Notifications: The Tribunal held that Notification No. 47/02, which restored the exemption for blowing, is clarificatory and has retrospective effect from 1-3-2002.

4. No Duty on Job Workers Post-1-3-2003: The Tribunal noted that duty liability post-1-3-2003 falls on weavers/dealers, not job workers, as per Rule 12B and related notifications.

Result: The appeals were allowed with consequential relief, confirming that the demands were time-barred and that the process of decatising, akin to blowing, is exempt from Central Excise duty.

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