2016 (3) TMI 301 - AT - Central Excise

Due Drop Process on Fabrics - Manufacture - duty demand - whether Due Drop Process on Fabrics will amount to manufacture and whether the Appellant s belief that it did not amount to manufacture is bonafide belief - Held that - Dew Drop Process was brought into the country in August 2000 from Korea. As gone through the write-up on the process of Dew Drop as well as the Certificate submitted by the Appellant in Appeal Memorandum which is from Dr.R.S. Gandhi, Textile Technologist and ex-Director (Mantra) (Man-made Textile Research Association), Surat. We find that the process does not have a long lasting effect and does not amount to transformation of the fabrics. It is more in the nature of enhancing the attributes or attractiveness of the fabrics. The effect also gets washed away by 3-4 simple washes. Under these circumstances, we can not find any fault with the Appellants having a bonafide belief that during the relevant period the process did not amount to manufacture and that they are not liable to Central Excise duty. It is also observed that the Department noticed the alleged duty evasion in January 2001, yet they issued the Show Cause Notice only on 01.04.2005, after almost 4 years. It is also noticed that the South Gujarat Due Drop Processors Association had also taken up the matter with the Ministry of Finance and Ministry of Textiles that the process of Dew Drop does not amount to manufacture and Central Excise duty is not leviable on the same. It is seen that the Ministry in its wisdom, has accepted the merits of the case and has exempted the process of Dew Drop from levy of Central Excise duty. The demand of Central Excise duty on the process of Dew Drop for the period August 2000 to December 2000 on the Appellant cannot be sustained. - Decided in favour of assessee

Summary

Issues:
- Whether the "Dew Drop Process" on Fabrics amounts to manufacture.
- Whether the Appellant's belief that the process did not amount to manufacture is a "bonafide belief."

Analysis:
1. Issue 1 - Dew Drop Process as Manufacture:
The Appellant, engaged in the Dew Drop Process on fabrics, was accused of manufacturing and clearing fabrics without duty payment. Central Excise Officers seized materials and issued a Show Cause Notice for duty recovery. The original authority confirmed that the process amounts to manufacture, imposing duty and penalties. The Commissioner (Appeals) upheld the decision, except for dropping a personal penalty. The Appellant argued that the process was introduced from Korea, not amounting to manufacture, citing representations and an exemption notification. The Counsel referenced legal precedents and argued the process did not fall under manufacturing categories. The Revenue contended duty evasion was detected, rejecting the bonafide belief argument.

2. Issue 2 - Bonafide Belief of the Appellant:
The Appellant's Counsel emphasized a bonafide belief that the Dew Drop Process did not attract Central Excise duty, citing representations and legal decisions. The Revenue opposed this, asserting the duty evasion was detected, justifying the extended period for issuing the Show Cause Notice. The Tribunal analyzed the process, noting it enhanced fabric attributes temporarily, not transforming them. Considering the delayed notice issuance, representations, and exemption notification, the Tribunal concluded the Appellant's belief was bonafide. They set aside the duty demand for the relevant period, allowing the appeal.

3. Conclusion:
The Tribunal ruled in favor of the Appellant, determining that the Dew Drop Process did not amount to manufacture for Central Excise duty purposes during the specified period. The decision highlighted the temporary nature of the process and the lack of lasting transformation on fabrics. Considering the circumstances, delayed notice, and representations, the Tribunal found the Appellant's belief bonafide, ultimately setting aside the duty demand.