2013 (1) TMI 122 - AT - Central Excise

Ayurvedic soap manufactured under the brand name MEDIMIX - classifiable under sub-heading 3401.12 directing nil rate of duty or under sub-heading 3401.19 chargeable to duty on MRP basis - use of power for brining caustic soda lye to the storage tanks - Held that - The case of the respondent is fully supported by Final Order passed in respect of another MEDIMIX soap manufacturing unit. In that case, the raw material supplier had contracted to supply the raw material at the storage tanks of the assessee and, as part of transportation of the material upto the tank, they took the aid of power. The Bench that such transportation of raw material could not be held to have been done in, or in relation, to the manufacture of soap taking support from Shalimar Paints Ltd. Vs. Commissioner 2001 (2000 (5) TMI 141 - CEGAT, KOLKATA). Their product cannot be classified under sub-heading 3401.19 by reason of the fact that power was used to bring one of the raw materials to the factory. Testing of raw materials and the final product - Held that - The respondent is a Proprietary concern. No oral evidence of its proprietor was taken by the Department. In these circumstances, Ground which is to the effect that the assessee admitted that the quality control equipments and machinery were operated with the use of power has no substance. The appellant (revenue) has not been able to come anywhere near proving the use of power by the respondent in the manufacture of MEDIMIX soap during the material period. - That electrically operated equipments were used for testing raw materials and the final product is a far cry or a ipse dixit. - Decided in favor of assessee.

Summary

Issues:
Classification of Ayurvedic soap under Central Excise Tariff Act, 1985 - Use of power in manufacturing process - Allegation of duty evasion - Applicability of extended period of limitation - Penalty imposition.

Analysis:
1. Classification Issue:
The appeal questioned the classification of Ayurvedic soap under the Central Excise Tariff Act, specifically whether it falls under sub-heading 3401.12 or 3401.19. The Commissioner held that as no power was used in the manufacturing process, the product was rightly classified under sub-heading 3401.12, attracting nil rate of duty. The Department argued that power was used for testing raw materials and final products, thus falling under sub-heading 3401.19 and liable for duty.

2. Use of Power in Manufacturing:
The Department contended that electrically operated equipment was used for testing raw materials, which was integral to the manufacturing process, making the product classifiable under sub-heading 3401.19. Citing precedents, they argued that such activities connected to manufacturing with power usage should attract duty.

3. Evidence and Counter-Arguments:
The respondent denied the use of power in the manufacturing process, highlighting discrepancies in the evidence presented by the Department. They referenced a previous case where a similar issue was decided in their favor, emphasizing the lack of evidence to prove power usage. The respondent also challenged the allegation of duty evasion, citing the absence of suppressed facts.

4. Judgment and Conclusion:
After thorough consideration, the Tribunal found no evidence of power usage by the respondent in manufacturing the Ayurvedic soap during the disputed period. The Commissioner's findings on the limitation issue, which were unchallenged, were upheld. Consequently, the appeal was dismissed, affirming the classification under sub-heading 3401.12 and the absence of duty liability.

In conclusion, the Tribunal's decision rested on the lack of substantiated evidence regarding power usage in the manufacturing process, leading to the dismissal of the appeal and upholding the classification under the Central Excise Tariff Act.