2008 (1) TMI 735 - AT - Central Excise

Summary

Issues:
1. Demand of duty for the period prior to 16-3-95 and penalty imposition.
2. Excisability of cotton waste generated during the manufacturing process.
3. Applicability of duty on cotton waste cleared to Domestic Tariff Area (DTA).

Issue 1:
The department issued a show-cause notice demanding duty and penalties from the assessee for clearing cotton waste to DTA without payment of duty during December 1994 to July 1995. The original authority confirmed the duty demand against the assessee by invoking the extended period of limitation and imposed a penalty of Rs. 1 lakh. In the appeal, the Commissioner set aside the duty demand for the period prior to 16-3-95 but affirmed it for the period after 16-3-95 due to the alignment of Central Excise Tariff with the Customs Tariff from that date. The penalty imposed by the lower authority was set aside.

Issue 2:
The appeal by the assessee contested the demand of duty for the period 16-3-95 to 31-7-95, arguing that the process generating cotton waste did not amount to "manufacture" as defined under Section 2(f) of the Central Excise Act. The Revenue's appeal challenged the vacating of duty demand and penalty for the period before 16-3-95, asserting that duty was leviable on cotton waste under a specific entry in the Central Excise Tariff Act.

Issue 3:
The Tribunal examined whether the generation of cotton waste during the manufacturing process constituted "manufacture" for excisability. Referring to a previous Supreme Court decision and the nature of the waste material, the Tribunal concluded that the process did not amount to "manufacture" under the Central Excise Act. Therefore, the commodity was held not excisable, and the assessee's appeal was allowed while the Revenue's appeal was dismissed.

This judgment addressed the demand of duty and penalty, the excisability of cotton waste, and the applicability of duty on waste cleared to DTA. The Tribunal ruled that the process of generating cotton waste did not amount to "manufacture" under the Central Excise Act, leading to the allowance of the assessee's appeal and the dismissal of the Revenue's appeal. The decision was based on the nature of the waste material and previous legal interpretations regarding the definition of "manufacture" in the context of excisability.