2011 (5) TMI 383 - AT - Central Excise

Manufacture and clearance of HDPE Tarpaulin falling under Chapter Heading 39.26 - Rule 25 of Central Excise Rules, 2002 - Merely because an appeal stand filed by the Revenue against the order of the Tribunal and stand admitted by Hon ble Supreme Court, by itself cannot be made the reason for holding the Tribunal s order as redundant, in the absence of any stay of operation of the said order - It stands concluded by Hon ble Apex Court in CCE Chennai Vs. M/s Tarpaulin International (2010 -TMI - 77012 - SUPREME COURT) that the process of stitching and fixing eyelets in the tarpaulin sheets would not amount to manufacture. As such, in view of the above declaration of law, we hold that no manufacturing activity was being undertaken by the appellant, thus requiring them to pay any duty of Excise. Consequently no duty is required to be confirmed against them and no penalty is required to be imposed. - Decided in the favour of the assessee

Summary

Issues:
1. Confirmation of demand of duty and penalty under Central Excise Act.
2. Manufacturing activity and duty liability.
3. Applicability of case law and pending appeal.
4. Interpretation of manufacturing process in relation to tarpaulin sheets.

Analysis:

1. The judgment addressed the confirmation of a duty demand and penalty imposed under the Central Excise Act on the appellant for manufacturing HDPE Tarpaulin without paying duty. The lower authorities confirmed a duty demand of Rs.14,14,080 and imposed an equal penalty on the appellant under Section 11AC of the Central Excise Act, 1944. Additionally, seized goods were confiscated with an option for redemption and an additional penalty of Rs.16,080 was imposed.

2. The main issue revolved around whether the activities undertaken by the appellant constituted manufacturing. The appellant argued that their processes of cutting, slitting, and eyeleting HDPE laminated fabrics into tarpaulin sheets did not amount to manufacturing as the laminated fabrics remained unchanged. They contended that since no manufacturing occurred, no duty could be demanded.

3. The appellant relied on a Tribunal decision in a similar case to support their argument. However, the adjudicating authority did not accept this precedent due to a pending appeal filed by the revenue against it before the Supreme Court. The Tribunal disagreed with this reasoning, emphasizing that the pendency of an appeal did not render the previous decision redundant, especially without a stay order.

4. The Tribunal referred to a recent decision by the Supreme Court regarding the manufacturing process of tarpaulin sheets. The Supreme Court held that stitching and eyeleting tarpaulin sheets did not amount to manufacturing as it did not change the basic characteristics of the raw material. Applying this precedent, the Tribunal concluded that the appellant's activities did not constitute manufacturing, and therefore, no duty, penalty, or confiscation of goods was warranted.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal and providing consequential relief to the appellant based on the determination that the activities undertaken did not amount to manufacturing under the Central Excise Act.