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2016 (6) TMI 1276 - AT - Central ExciseManufacture - whether converting of Canvas roll into - (A) the Canvas Frame, (B) Canvas Board, (C) Canvas Pad, amounts to manufacture and liable to excise duty? Held that - by the processes adopted by the appellant, no transformation to new product or new article takes place - Hon ble Supreme Court in the case of J.G. Glass 1997 (12) TMI 110 - SUPREME COURT OF INDIA , held that the process of cutting/pasting undertaken by the appellant does not amount to manufacture. The demand raised by the Revenue is held otherwise also barred by limitation as Revenue were fully aware of the existence of the appellant s unit and its activities. Penalty u/r 26 - Held that - no mala fide can be attributed to Sh. Shirish Jain-appellant, the Director of the appellant company and Sh. B.K. Sharma-appellant, President (Tech.) of the company (appellant-TCPL) and therefore penalty against them under Rule 26 is also set aside. Appeal allowed - decided in favor of appellant.
Issues:
1. Whether converting canvas fabric into various usable forms amounts to manufacture and is liable to excise duty. 2. Whether the processes undertaken by the appellant constitute 'manufacture' as defined under the Central Excise Act. 3. Whether the duty demand is barred by limitation. 4. Whether penalties imposed on the appellant company's Director and President are justified. Analysis: Issue 1: The appeals were filed against the Order-in-Appeal holding that converting canvas fabric into Canvas Frame, Canvas Board, and Canvas Pad amounts to manufacture and is liable to excise duty. The appellant, engaged in processing canvas fabric, argued that the processes do not amount to manufacture as the essential character of the canvas does not change. The Revenue issued show cause notices demanding duty, contending that the processes undertaken amount to manufacture. The Adjudicating Authority confirmed duty demand for specific periods and imposed penalties. The Commissioner (Appeals) partially allowed the appeal, exempting duty on Canvas Roll but upholding it on other products, remanding for re-calculation. The Tribunal considered the processes adopted and held that no transformation to a new product occurs, following the Supreme Court's definition of 'manufacture,' setting aside the duty demand and penalties. Issue 2: The appellant argued that the processes of cutting and pasting do not result in a new commodity with distinctive name, character, or use, citing relevant legal precedents. The Revenue claimed that the processes amount to manufacture. The Tribunal, applying the two-fold test from legal precedents, concluded that the appellant's processes do not create a new commercial commodity or change the basic character of the canvas fabric, thus not constituting 'manufacture.' The demand was also held to be time-barred, as the Revenue was aware of the appellant's activities. Consequently, the duty demand was set aside, and the appeals were allowed with appropriate relief. Issue 3: The Tribunal found that the duty demand was barred by limitation as the Revenue was aware of the appellant's activities, rendering the demand invalid. Accordingly, the demand was set aside, and the appeals were allowed with consequential relief as per the law. Issue 4: Regarding penalties imposed on the Director and President of the appellant company, the Tribunal found no mala fide intentions and set aside the penalties. The appeals of the Director and President were allowed with consequential relief in accordance with the law. This detailed analysis of the judgment comprehensively covers the issues involved, the arguments presented, and the Tribunal's findings and conclusions, preserving the legal terminology and significant details from the original text.
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