2005 (5) TMI 597 - AT - Central Excise

Issues Involved: Process of manufacture, excisability of goods, trading vs. manufacturing, eligibility for SSI exemption, penalties under Rule 173Q and Section 11AC, interest under Section 11AB, confiscation of unaccounted goods.

Issue-wise Detailed Analysis:

1. Process of Manufacture and Excisability of Goods:
The primary issue was whether the activities undertaken by the appellant constituted a process of manufacture. The Commissioner concluded that the appellant was not merely diluting a product by adding water but was involved in a manufacturing process. This conclusion was based on the Chemical Examiner's report and the contents of a seized notebook, which showed the use of inputs like AOS 1000, BM, and water, resulting in the production of a new product known in the textile processing industry. The Tribunal held that the same process was undertaken from the beginning, thus rejecting the appellants' contention that Micro X and Micro Fil were not excisable goods. The Tribunal referred to the case of Aparajita Traders, which held that the conversion of silicon oil into silicon emulsion amounts to manufacture.

2. Trading vs. Manufacturing:
The appellants argued they were only trading in certain products and not manufacturing them. However, the Tribunal found this to be a mere averment unsupported by evidence. The Department's contention that the appellants manufactured these products was held to be established. Consequently, the value of clearances of these products was added to the total value of clearances for determining eligibility for SSI exemption.

3. Eligibility for SSI Exemption:
The Commissioner denied SSI exemption for the year 1993-94 on the grounds that the small-scale registration certificate did not mention the products on which duty was demanded. The Tribunal referred to the Board's Circular No. 18/93-CX.6, which clarified that it was not necessary for an SSI unit to get each product endorsed in its registration certificate to claim SSI exemption. Therefore, the Tribunal held that SSI exemption could not be denied for the year 1993-94. For subsequent years, the duty liability was determined in accordance with slab-wise rates.

4. Penalties and Interest:
The Tribunal held that Section 11AC was not applicable for the period before 26-9-1996, but penalties under Rule 173Q were applicable for the entire period due to the appellants' failure to register and follow Central Excise procedures. However, a nominal penalty was deemed sufficient. The penalty under Rule 209A on the third appellant was set aside due to insufficient cause. The demand for interest under Section 11AB was to be calculated only for clearances and duty liabilities arising after September 1996.

5. Confiscation of Unaccounted Goods:
The Tribunal upheld the confiscation of unaccounted goods valued at Rs. 14,697/- seized from the premises of DCI.

Separate Judgments:
The Tribunal passed the following orders:
- M/s. Maheshwari was entitled to the benefit of Notification 1/93 throughout the period in question. Duty needed to be recalculated after according this benefit.
- Penalty under Section 11AC was set aside, and the penalty under Rule 173Q was reduced to Rs. 10,000/-.
- Interest under Section 11AB was to be calculated only for clearances and duty liabilities arising after September 1996.
- Duty demand on M/s. DCI was to be recalculated after according the benefit of Notification No. 16/97.
- Penalty under Rule 173Q for M/s. DCI was reduced to Rs. 2,000/-.
- Penalty on Mr. Rajesh K. Baheti was set aside.
- Confiscation of unaccounted goods was upheld.

Conclusion:
The appeal was partly allowed concerning penalties, and the cases were remanded for determining the duty liability after according the benefits of the relevant notifications.

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