2009 (1) TMI 573 - AT - Central Excise

Summary

Issues:
1. Demand of duty on the process of dyeing and colour fixing on fabrics.
2. Imposition of penalty for non-registration.
3. Reduction of duty liability and penalty by the lower appellate authority.
4. Appeal by the Revenue against the scaling down of duty demand.
5. Cross-objection by the assessee against the imposition of penalty.

Analysis:

1. The case involved the demand of duty on the process of dyeing and colour fixing on fabrics by the respondents using steam for certain colors. A show-cause notice was issued for duty payment and penalty imposition due to the processes being considered as manufacturing without proper registration. The adjudicating authority confirmed a duty demand of Rs. 7,61,885, confiscated goods, and imposed penalties. The lower appellate authority reduced the duty liability to Rs. 96,408 for specific colors requiring steam and also reduced the penalty under relevant sections.

2. The Tribunal found that the lower appellate authority's decision was based on the fact that steam was used only for specific colors, as stated by the partner of the assessee. The Department failed to provide evidence supporting the claim that dyeing and color fixing could only be done using steam. As a result, the Tribunal upheld the reduction of duty to Rs. 96,408, rejecting the Revenue's appeal.

3. Regarding the cross-objection by the assessee against the penalty imposition, the Tribunal noted that the fabrics were in a semi-finished stage and had not reached the dutiable stage. Consequently, the penalty under section 11AC was deemed unwarranted as the goods were within the factory premises, with no evidence of clandestine removal. The Tribunal set aside the penalty as reduced by the lower appellate authority.

4. In conclusion, the Tribunal rejected the Revenue's appeal against the reduced duty demand and allowed the cross-objection filed by the assessee against the penalty imposition. The decision was made based on the lack of evidence supporting the necessity of steam for all colors in the dyeing and fixing process, as well as the absence of grounds for penalty imposition due to the status of the goods within the factory premises.