2006 (7) TMI 462 - AT - Central Excise

Summary

Issues:
1. Whether the appellants are considered "manufacturers" of towels and bed sheets.
2. Whether the activities undertaken by the appellants amount to "manufacture" under the Central Excise Act.
3. Applicability of non-tariff Notifications to the appellants.
4. Validity of the penalties imposed on the appellants.

Analysis:
1. The judgment revolves around the primary issue of whether the appellants can be classified as "manufacturers" of towels and bed sheets. The Commissioner contended that the appellants engaged in activities that qualified them as manufacturers, including supplying raw materials and affixing brand names. However, the appellants argued that they lacked manufacturing facilities and ownership of goods was irrelevant to excise duty liability. The Tribunal found no evidence of manufacturing activities by the appellants, emphasizing the absence of infrastructure and manpower for production. The definition of "manufacturer" under Section 2(f) was scrutinized, and the Tribunal ruled in favor of the appellants, citing the lack of a manufacturing process.

2. The second issue pertains to whether the activities conducted by the appellants constitute "manufacture" under the Central Excise Act. The Commissioner's view was based on the premise that the appellants' actions, such as affixing brand names and packing, amounted to manufacturing. However, the Tribunal disagreed, highlighting that without a manufacturing process in place, the appellants could not be deemed manufacturers. The Tribunal referenced relevant legal precedents, including the case of Ujagar Prints, to support its decision in favor of the appellants.

3. The judgment also addresses the applicability of non-tariff Notifications to the appellants. The Commissioner relied on certain notifications to support the duty demand on the appellants. However, the Tribunal found these notifications irrelevant in the absence of any manufacturing facility with the appellants. The Tribunal concluded that the notifications did not apply to entities without manufacturing capabilities.

4. Lastly, the validity of the penalties imposed on the appellants was scrutinized. The Tribunal, after careful consideration of the submissions, found a prima facie case against the duty demand raised by the Commissioner. Noting the lack of manufacturing activities by the appellants and erroneous observations in the impugned order, the Tribunal granted waiver of pre-deposit and stay of recovery concerning the duty and penalty amounts. The judgment ultimately favored the appellants, emphasizing the absence of manufacturing operations and supporting their position based on legal interpretations and precedents.