2011 (4) TMI 1104 - AT - Central Excise

Duty demand with interest and penalty under Rule 173Q of Central Excise Rules, 1944 - appellants were found to have recovered excess amount from the customer which was not accounted under any head of expenditure admissible from the gross price to arrive at the assessable value - appellant carrying process of metalising/lacquering on duty paid polyester film. He submitted that during the relevant period the activity was considered as not amounting to manufacture and the classification lists filed were also approved Held that - lamination/metalising/lacquering polyester film does not amount to manufacture and therefore question of collecting duty, let alone differential duty, does not arise, appeal is allowed with consequential relief to the appellant

Summary

Issues:
1. Duty demand confirmation with interest and penalty imposition under Rule 173Q of Central Excise Rules, 1944.
2. Whether metallising/lacquering/laminating of polyester film amounts to manufacture for the purpose of levying duty.

Analysis:

Issue 1:
The Appellate Tribunal confirmed a duty demand of Rs. 14,03,614/- with interest and imposed a penalty of Rs. 1.5 lakhs on the appellant under Rule 173Q of the Central Excise Rules, 1944. The confirmation was based on the appellant's recovery of an excess amount from the customer, not accounted for under any admissible expenditure head, affecting the assessable value. The appellant contested the duty demand, arguing that the process in question did not amount to manufacture, citing relevant judicial precedents to support their stance.

Issue 2:
The crux of the matter revolved around whether metallising/lacquering/laminating of polyester film constituted manufacturing for duty imposition purposes. The appellant contended that the process did not amount to manufacture, referencing decisions by the Hon'ble Bombay High Court, the Hon'ble Supreme Court, and previous Tribunal rulings. Conversely, the Departmental Representative argued in favor of the process being classified as manufacture, citing Tribunal decisions that differed from the appellant's position.

In its analysis, the Tribunal considered the conflicting viewpoints and legal precedents presented by both sides. It emphasized that the determination of whether the process amounted to manufacture was pivotal in resolving the issue, bypassing the valuation aspects and demand accuracy. Notably, the Tribunal highlighted the Supreme Court's stance that mistakenly filing a classification list did not mandate duty payment if legally unwarranted.

Ultimately, the Tribunal sided with the appellant, concurring that metallising/lacquering/laminating of polyester film did not constitute manufacture. It aligned with the appellant's position based on the applicable legal precedents and dismissed the duty imposition, thereby allowing the appeal and granting relief to the appellant.

This detailed analysis of the judgment showcases the legal intricacies involved in the case, the arguments presented by both parties, and the Tribunal's reasoning leading to the final decision in favor of the appellant.