2011 (12) TMI 436 - AT - Central Excise

Duty demand - MODVAT Credit - Manufacturer of the Bisleri Branded Mineral Water - Bar of limitation - Whether the demand in question is required to be held as bared by limitation or the Revenue was justified in invoking the longer period of limitation - Difference opinion - Majority order - Held that - as such the product having emerged as a semi-finished goods cannot be held to be an excisable commodity so as to attract any duty of excise. They cannot be said to be hit by paras 4 and 5 of Notification No. 88/99, dated 1-3-1999. For adopting the longer period, Revenue has to allege and prove that there was positive suppression and mis-statement on the part of the assessee with an intention to evade payment of dues. The above proposition does require support of any precedent decision - the fact that others were paying duty also cannot be made a ground for alleging suppression to the appellant. It is well settled that for invocation of longer period, the suppression or mis-statement with an intent to evade payment of duty has to be alleged and proved towards the assessee by independent evidence relatable to him and not on the ground that others were paying the duty. As such, I am of the view that the demand is hit by limitation as there is no evidence to the effect that the appellants knowingly indulged in non-payment of duty - Decided in favour of assessee.

Issues Involved:
1. Eligibility for small-scale exemption.
2. Definition of "manufacturer" and "manufacture."
3. Affixing of brand name and its implications.
4. Classification of the product as intermediate or final goods.
5. Applicability of extended period of limitation.
6. Entitlement to Modvat credit.

Detailed Analysis:

1. Eligibility for Small-Scale Exemption:
The primary issue was whether the appellant was eligible for small-scale exemption while manufacturing branded mineral water under the brand name "Bisleri," which did not belong to them. The investigation concluded that the appellant was not eligible for the exemption, resulting in a duty demand of Rs. 4,70,301/- and a penalty of Rs. 25,000/- under Section 11AC of the Central Excise Act, 1944.

2. Definition of "Manufacturer" and "Manufacture":
The appellant claimed they were merely job workers for M/s. Gujarat Beverages (GB), performing only the filling and sealing of containers with water, and argued that the manufacturing process was incomplete without the affixing of labels, which was done by GB. However, the Tribunal found that the activity of producing processed water and filling it into bottles constituted "manufacture" under Heading No. 2201.19 of the Tariff. The Tribunal also noted that the bottles and caps already had embossed labels and brand names, thus completing the manufacturing process.

3. Affixing of Brand Name and Its Implications:
The appellant argued that they did not affix the brand name "Bisleri" themselves, as the bottles and caps provided by GB already had the brand name. The Tribunal observed that since the brand name was already present on the bottles and caps, the appellant could not claim they had not completed the manufacturing process. The Tribunal concluded that the appellant was indeed manufacturing branded goods, thus ineligible for the small-scale exemption.

4. Classification of the Product as Intermediate or Final Goods:
The appellant contended that the filled and sealed bottles were semi-finished goods, as the mandatory labels required under the Standards of Weights and Measures Act and Packaged Commodity Rules were affixed by GB. The Tribunal, however, held that the bottles filled and sealed by the appellant were final excisable products, ready to be marketed, thus attracting excise duty.

5. Applicability of Extended Period of Limitation:
The appellant argued that the demand was time-barred, as the show-cause notice was issued in June 2002 for the period 1999-2000, and claimed they were under a bona fide belief that they were merely job workers. The Tribunal, however, upheld the invocation of the extended period of limitation, noting that the appellant did not verify their legal obligations and did not keep proper accounts of the goods manufactured. The Tribunal found that the appellant's fellow job workers were paying duty on similar products, indicating that the appellant was aware of their duty liability.

6. Entitlement to Modvat Credit:
The appellant requested the benefit of Modvat credit on inputs contained in the finished goods to offset the duty demanded. The Tribunal noted that this plea was not raised before the adjudicating authority and was rejected due to a lack of documentary evidence. However, the Tribunal acknowledged that this legal plea should have been considered and allowed upon the production of necessary documents.

Separate Judgments:
- Majority Decision: The majority concluded that the appellant was not merely a job worker but a manufacturer of the final excisable product, thus liable to pay duty. The extended period of limitation was rightly invoked, and the denial of the small-scale exemption was justified. The appeal was dismissed.
- Dissenting Opinion (Archana Wadhwa, Member (J)): The dissenting member disagreed with the majority, holding that the appellant was not the manufacturer of the final product, as the final labeling was done by GB. She also found the demand time-barred and opined that the appellant should be allowed the benefit of Modvat credit. She allowed the appeal with consequent relief to the appellant.
- Third Opinion (Dr. P. Babu, Member (T)): The third member agreed with the dissenting opinion, concluding that the appellant was not the manufacturer of the final product, the demand was time-barred, and the appellant should be allowed the benefit of Modvat credit. The appeal was allowed with consequential relief.

Final Decision:
In view of the majority decision, the appeal was allowed with consequential relief to the appellant.

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