2008 (6) TMI 63 - AT - Central Excise

Activity of cleaning, purifying, blending and packing of duty paid Glucovita Glucose-D, from bulk packs to retail packs, on job work basis in view of CBEC Circular No. 7/90-CX-1, dated 7-3-1990 appellants had bona fide belief that activity not amounts to manufacture - extended period cannot be invoked impugned Circular cannot be applied with retrospective effect in terms of Circular, appellants are required to discharge the duty liability only for the clearances w.e.f. 7-3-1990

Issues:
1. Whether the processes of cleaning, purifying, blending, and packing of Glucovita Glucose-D amount to manufacture?
2. Application of relevant case laws and legal principles.
3. Burden of proof on the Department to establish manufacturing activity.
4. Impact of circulars and notifications on the classification of the process as manufacture.
5. Time limitation for demand of duty liability.
6. Applicability of penalties based on the conduct of the appellants.

Analysis:
1. The appeal involved a dispute regarding whether the processes of cleaning, purifying, blending, and packing of Glucovita Glucose-D by the appellants constituted manufacturing activity. The lower authority had ruled in favor of the Revenue, leading to an appeal. The Original Authority, upon remand, upheld the decision that the processes amounted to manufacture, without quantifying the duty amount but imposing a penalty under Rule 173Q. The period of dispute ranged from 1986 to 1990, with a Show Cause Notice issued in 1990.

2. The learned Advocate for the appellant relied on various case laws, emphasizing that for an activity to be considered manufacturing, it must result in the emergence of a new commercial product distinct from the original. Additionally, the absence of specific Chapter Notes during the relevant period regarding the processes undertaken by the appellants was highlighted, arguing that the burden of proof to establish manufacturing lay with the Department.

3. The appellants submitted samples to demonstrate that there was no significant change in the product before and after processing, indicating that the processes did not result in a new product. They further cited decisions where the addition of substances or processes for enhancement did not amount to manufacturing, questioning the application of penalties based on the lack of change in the product.

4. The impact of circulars and notifications on the classification of the process as manufacture was a key point of contention. The appellants operated under the belief that their processes did not amount to manufacture, citing historical circulars supporting their position. The Tribunal considered the timing of relevant circulars and ruled that the demands prior to a specific date were not sustainable due to the appellants' bona fide belief and the non-retrospective application of certain circulars.

5. In light of the timing of circulars and the appellants' belief, the Tribunal held that a significant portion of the demand was time-barred, with duty liability only applicable from a specified date. The Original Authority was directed to quantify the duty liability within a set timeframe, emphasizing the limited scope of liability based on the Tribunal's decision.

6. The issue of penalties was addressed, with the Tribunal ruling that no penalties could be levied due to the absence of contumacious conduct by the appellants. The decision was made in favor of the appellants, with a directive on duty liability calculation and payment within a specified period.

This detailed analysis outlines the key legal arguments, precedents cited, burden of proof considerations, impact of circulars, time limitation for demands, and the Tribunal's ruling on duty liability and penalties in the context of the appeal.

← Previous Next →