2010 (8) TMI 392 - AT - Central Excise

Appeal New plea before Tribunal - manufacture of industrial gases classifiable under Chapter 28 - Removal without payment of duty - Whether a particular activity amounts to manufacture within the meaning of the provisions of law applicable to the parties is not a pure question of law. It is a mixed question of fact and law. Being so certainly when such an issue is raised, the party raising such issue as well as the other side will be entitled to place necessary materials in support of the rival contentions. Obviously, therefore, opportunity will have to be given to the parties to place materials in support of the rival contentions on record. This is not to suggest that the authorities can travel beyond the scope of show cause notice. Nevertheless when the assessee raises his specific defence in answer to the allegations to the show cause notice, certainly to counter the defence the department would also be entitled for a fair opportunity and it would obviously include opportunity to place materials on record to counter such defence. - Matter remanded back.

Summary

Issues involved:
Challenge to order confirming demand, penalty imposition, and duty liability on industrial gases manufacturing activity without payment of duty.

Detailed Analysis:

Issue 1: Challenge to Order Confirmed Demand and Penalty Imposition
The appellants contested the order confirming the demand of Rs. 1,60,26,799/- and education cess, along with penalties imposed on various individuals associated with the business. The Commissioner had also ordered the recovery of the amount and imposed penalties against the appellants. The appellants argued that they had purchased liquid nitrogen in tankers and refilled small containers, believing it to be manufacturing and paying duty accordingly. However, subsequent legal decisions and a circular clarified that this activity did not amount to repacking or manufacturing under the law. The appellants contended that the Commissioner erred in imposing duty liability and penalties based on this activity. The Commissioner's order was challenged on these grounds.

Issue 2: Duty Liability on Industrial Gases Manufacturing Activity
The appellants were engaged in the manufacture of industrial gases under Chapter 28 of the Central Excise Tariff Act, 1985. During the investigation, it was found that the appellants had removed finished goods without paying duty, leading to a show cause notice being issued. The appellants argued that their activity of refilling gas in small containers from tankers did not amount to repacking or manufacturing under the law, as clarified by legal precedents and a circular issued by the Board. The Commissioner had held the appellants liable for duty and penalties, which the appellants contested based on the nature of their activity and the legal interpretations provided by the Tribunal and the Supreme Court.

Issue 3: Remand for Further Consideration
The Tribunal observed that the specific issue raised by the appellants regarding the nature of their activity and its classification under the law had not been raised before the Adjudicating Authority. While acknowledging the importance of this issue, the Tribunal deemed it necessary to remand the matter to the Commissioner for fresh consideration. The Tribunal emphasized that determining whether the activity constituted manufacturing was a mixed question of fact and law, requiring both parties to present necessary materials to support their contentions. The matter was remanded to allow both parties to present their arguments and evidence before the Commissioner for a fresh decision, without expressing any opinion on the issue. The impugned order was set aside, and the appeal was allowed, with the amount already deposited remaining with the Department pending the Commissioner's final decision.