2012 (11) TMI 1004 - AT - Central Excise

Duty demand - Conversion of HDPE fabrics in HDPE bags by stitching - Appellant neither obtained central excise registration nor paid any duty - Penalty u/s 11AC - Held that - The appellant were receiving cut pieces of HDPE fabrics from principal manufacturers and converting the same into HDPE bags on job work basis. We are of the view that by this activity of the appellant a new product with distinct name characteristics and uses has emerged and as such the processes undertaken by them amounts to manufacture and hence would attract Central Excise duty under Heading No. 3923.90 - it is clear that the appellant neither obtained central excise registration nor had intimated the jurisdictional central excise authorities about their activities in any manner. In view of these circumstances there is indeed suppression of facts with intention to evade payment of duty and longer limitation period for recovery of duty has been correctly invoked under proviso to Section 11A(1) of the Central Excise Act and penalty under Section 11AC has been correctly imposed - Decided against assessee.

Summary

Issues:
1. Whether the appellant's activity of converting HDPE fabrics into HDPE bags amounts to manufacture for the purpose of Central Excise duty.
2. Whether the demand raised against the appellant is barred by limitation.

Analysis:

Issue 1: Activity Amounting to Manufacture
The appellant received HDPE fabrics for conversion into HDPE bags by stitching on a job work basis. The department contended that this activity amounts to manufacture, attracting Central Excise duty. The Addl. Commissioner confirmed the duty demand and imposed a penalty under Section 11AC of the Central Excise Act. The Commissioner (Appeals) upheld this decision. The appellant challenged this, arguing that stitching fabrics cannot be considered manufacturing and, therefore, duty imposition is incorrect. However, the Tribunal held that the appellant's activity resulted in a new product with distinct characteristics and uses, qualifying as manufacturing under Heading No. 3923.90. Thus, the Central Excise duty was deemed applicable.

Issue 2: Limitation for Demand
The appellant did not have central excise registration, did not inform the authorities about their activities, and did not file returns for the goods cleared. The Tribunal found that this lack of disclosure constituted a suppression of facts with the intent to evade duty payment. Consequently, the longer limitation period for duty recovery was rightly invoked under the proviso to Section 11A(1) of the Central Excise Act. The penalty under Section 11AC was also deemed correctly imposed. Due to these circumstances, the Tribunal concluded that there was no flaw in the impugned order. Therefore, the appeal was dismissed.

In summary, the Tribunal upheld that the appellant's activity of converting HDPE fabrics into HDPE bags constituted manufacturing, subjecting them to Central Excise duty. Additionally, the demand raised against the appellant was not barred by limitation as their failure to disclose relevant information warranted the application of a longer limitation period for duty recovery, along with the imposition of penalties.