2012 (9) TMI 340 - AT - Central Excise

Extended period of limitation - conversion of rejected materials into granules - suppression Held that - reprocessing of rejected goods if yielded only scrap, process would amount to manufacture and the scrap is removable on payment of duty. Necessary intimations were given by the appellant on 4-2-2002 and subsequently there were correspondences with the Revenue, which prove that the facts were not suppressed by the appellant from the department In favor of assessee

Summary

Issues:
1. Whether the conversion of rejected materials into granules amounts to manufacture.
2. Whether the demand of duty is sustainable.
3. Whether the extended period of limitation is applicable.

Analysis:

Issue 1 - Conversion of Rejected Materials:
The case involved M/s. Essen Multipack Limited, engaged in manufacturing multi-layer films, who supplied goods to a customer, out of which a portion was rejected and returned. The appellant availed cenvat credit under Rule 16(1) of Central Excise Rules. The rejected goods were processed into waste and scrap (granules) and cleared at a lower price. The original authority held that this conversion amounted to manufacturing a new product, supported by a Chartered Engineer's opinion. The Tribunal referred to previous cases where reprocessing rejected goods into scrap was considered manufacturing, leading to duty payment. The conversion process resulted in a distinct product, justifying the duty payment.

Issue 2 - Sustainability of Duty Demand:
The Commissioner (Appeals) set aside the original order, demanding duty, stating that the rejected goods were in film form while the cleared goods were in granule form, thus Rule 16(2) did not apply. However, the Tribunal found that the conversion process constituted manufacturing, aligning with precedents. The Tribunal also highlighted that the duty demand was proper, considering the new product created. The Tribunal dismissed the Revenue's arguments, deeming them meritless and unsustainable, ultimately allowing the appellant's appeal.

Issue 3 - Extended Period of Limitation:
Regarding the limitation period, the Tribunal ruled that the extended period was not applicable due to no suppression of facts by the appellant. Citing a Supreme Court case, it stated that conscious withholding of information is necessary to invoke the extended period. The appellant had provided necessary intimations and correspondences with the Revenue, indicating no suppression. Therefore, the question of limitation was deemed insignificant in light of the merit-based discussions. The Tribunal dismissed the department's appeal, affirming the decision on the limitation period.

In conclusion, the Tribunal upheld that the conversion of rejected materials into granules constituted manufacturing, justifying duty payment. The duty demand was deemed sustainable, and the extended period of limitation was found inapplicable due to no suppression of facts. The appellant's appeal was allowed with consequential relief, highlighting the thorough analysis and legal reasoning employed in the judgment.