2008 (5) TMI 56 - AT - Central Excise

Whether the process of metallising and lacquering and laminating on duty paid Polyester, BOPP/PUC films etc. amounts to manufacture or not - held that product is a film to start with and remains a film after lamination or metallization and no new and distinct product comes into existence, hence there is no any manufacturing involved

Summary

Issues:
1. Whether the process of metallising, lacquering, and laminating on duty paid films amounts to manufacture.
2. Validity of penalty imposition by Commissioner (Appeals without Revenue appeal.
3. Applicability of the decision in the case of M/s. Metlex (I) Pvt. Ltd. to the present case.

Analysis:

1. The dispute in the appeal revolved around whether the process of metallising, lacquering, and laminating on duty paid films constitutes manufacturing. The Asst. Commissioner confirmed duty demand, considering the emergence of a new product. However, no penalty was imposed due to the absence of willful misstatement. The Commissioner (Appeals) upheld the manufacturing activity and imposed a penalty, contrary to established jurisprudence principles. The Tribunal referenced the Supreme Court's decision in M/s. Metlex (I) Pvt. Ltd., emphasizing that no new product emerges after the process, thus not constituting manufacturing. The Tribunal held that the activity undertaken by the appellant does not amount to manufacture, leading to the appeal's allowance and setting aside of the impugned orders.

2. The Commissioner (Appeals) imposed a penalty on the appellant despite no appeal by the Revenue challenging the Asst. Commissioner's decision to drop the penalty. The Tribunal deemed this action against established jurisprudence principles, stating that in the absence of a Revenue challenge, the Commissioner (Appeals) lacked the authority to decide and impose a penalty. This highlighted a procedural error in the penalty imposition process.

3. The Tribunal referred to the Supreme Court's decision in M/s. Metlex (I) Pvt. Ltd., emphasizing that the process under consideration did not result in the creation of a new product, aligning with the Court's ruling. The Commissioner (Appeals) attempted to distinguish this decision based on the introduction of an eight-digit classification code in the Central Excise Tariff Act. However, the Tribunal clarified that the determination of manufacturing under Section 2(f) of the Central Excise Act precedes classification. Therefore, the classification distinction made by the Commissioner (Appeals) was deemed irrelevant, and the Supreme Court's decision regarding the absence of a new product post-process remained applicable, leading to the allowance of the appeal.