2015 (2) TMI 306 - AT - Central Excise

Manufacture or not - appellants are receiving duty paid PVC sleeves in the form of flatten PVC tubes, either whole or cut into pieces of specific sizes. The sleeves are cut into horizontal pieces of required width which are then mounted on moulds of specific shape and dimensions (as per the packing container of the user of such sleeves) and such cut sleeves heated upto a specified temperature to get particular shape and so formed sleeves are thereafter used to seal the caps of plastic containers - Invocation of extended period - Imposition of interest and penalty - Held that - Appellants are getting PVC tubes in the flatten form sometime in running length and sometime cut into pieces of specific length. We have also seen the sample of the same. The flatten PVC tube can be used for packing and other purposes. However, after cutting and forming, the said sleeves cannot be used for packing purpose but can be used only for sealing a plastic container of specific dimensions. We have also gone through the report of the Chemical Examiner wherein it has been clarified that the inputs are bi-axially oriented plain sleeves while the tube/final product is fully oriented blown/formed sleeve for the purpose of shrink wrap. It is clear from the sample once the sleeves is formed as above, these cannot be used for any purpose other than sealing plastic container. - The name, use and character of input and final product are different. The inputs are plain sleeves which can be used for wide variety of purpose and can be used as shrink wrap. The formed sleeves can be used for only sealing the plastic containers. Inputs are biaxially oriented whole output is fully oriented blown/formed. Thus in our view all the three conditions are satisfied and the process would therefore amount to manufacture. Argument of the appellant is that the department knew about it from 2000 onwards while the show-cause notice has been issued in 2003. We find that the said letter was written in pursuance of the investigation initiated by the Revenue. Thereafter the appellant has made representation etc at different levels and investigation continued. The samples were tested in 2003 and after completion of the investigation the show-cause notice has been issued. We agree with the learned A.R. that the knowledge of the department is not relevant for determining whether extended period of limitation can be invoked or not. However in the present case, there is no evidence to indicate that there was willful intention to evade duty. In fact, appellant has also represented their case to high authorities explaining in detail the process and why in their view it does not amount to manufacture. Keeping in view, over all facts and circumstances of the case, we are of the view that the ingredients for invoking the provisio to Section 11A are not satisfied and therefore extended period of limitation cannot be invoked. If the appellant was eligible for getting the benefit of CENVAT Credit the actual demand will come down substantially. We therefore remand the matter to first adjudicating authority to examine the claim of the appellant in respect of CENVAT Credit on inputs. In case they are eligible for the same, recompute the duty liability and accordingly, re-determine the interest. Keeping in view the nature of dispute, as also facts and circumstances, in our view, no penalty is warranted - Appeal disposed of.

Summary

Issues:
1. Whether the process undertaken by the appellant amounts to manufacture and attracts excise duty liability.
2. Whether the extended period of limitation can be invoked in this case.
3. Whether the appellant is entitled to claim CENVAT Credit on duty paid inputs.

Analysis:

Issue 1:
The appellant argued that the process of forming PVC sleeves does not result in a new commodity and, therefore, does not amount to manufacture. They contended that the goods remained PVC sleeves even after the process, with only a change in shape. The appellant also raised the issue of the department's knowledge of the process since 2000 and the entitlement to CENVAT Credit on duty paid inputs. The Revenue, on the other hand, argued that the process results in a new product with different characteristics and use, thus constituting manufacture. They also supported the invocation of the extended period of limitation. The Tribunal examined samples of both inputs and final products, concluding that the process resulted in a new product with a different name, character, and use, satisfying the conditions for manufacture.

Issue 2:
Regarding the invocation of the extended period of limitation, the appellant argued that the department's knowledge of the process since 2000 should prevent its application. However, the Tribunal found that the investigation continued due to the appellant's representations and concluded that there was no willful intention to evade duty. Therefore, the Tribunal held that the extended period of limitation cannot be invoked in this case.

Issue 3:
The appellant claimed entitlement to CENVAT Credit on duty paid inputs, which was not addressed by the lower authorities. The Tribunal found merit in this argument and remanded the matter to the first adjudicating authority to examine the appellant's claim for CENVAT Credit. If eligible, the duty liability would be recalculated accordingly. The Tribunal also noted that considering the nature of the dispute and the circumstances, no penalty was warranted in this case.

In conclusion, the Tribunal disposed of the appeal by directing the first adjudicating authority to re-examine the CENVAT Credit claim while emphasizing that no penalty was necessary based on the facts presented.