2018 (2) TMI 560 - AT - Central Excise

Manufacture - carrying out of gas cutting - whether the process amounts to manufacture? - Held that - In the case of Sanjay Industrial Corpn. 2015 (3) TMI 592 - SUPREME COURT also on merit it was held that the activity amounts to manufacture - the activity of the appellant, i.e. process of profile cutting from M.S. Plates, attracts excise duty. Penalty - Held that - penalty appears on higher side - penalty reduced to ₹ 1 lakh. Appeal allowed in part.

Summary

Issues:
1. Liability to pay duty on gas cutting of duty paid MS plates.
2. Claim of bonafide belief by the appellant.
3. Penalty imposed on the proprietor.
4. Compliance with terms of removal in the second round of litigation.
5. Reduction of penalty imposed on the appellant.

Analysis:
1. The appellant was engaged in gas cutting of duty paid MS plates from February 1991 to January 1996. The Tribunal held that this activity amounts to manufacturing, attracting excise duty. The appellant claimed they believed it did not amount to manufacture, leading to duty demand and penalty imposition. The Tribunal upheld the duty liability but remanded the matter for certain aspects. In the present appeal, the Tribunal affirmed the duty liability on the appellant's activity.

2. The appellant contended that they were under a bonafide belief that the gas cutting activity did not amount to manufacture. The appellant's counsel referred to a Supreme Court case setting aside an earlier Tribunal order based only on limitation grounds, without a specific merit-based ruling. The appellant requested setting aside the impugned order based on this argument.

3. The penalty imposed on the proprietor was a point of contention. In the earlier order, the Tribunal had set aside the penalty on the proprietor. In the present appeal, a penalty of ?4 lakhs was imposed on the appellant, which was deemed excessive given the claimed uncertainty of the law by the appellant. The Tribunal modified the penalty, reducing it to ?1 lakh, providing the appellant with a relief of ?3 lakhs.

4. The appellant raised concerns regarding compliance with terms of removal in the second round of litigation. The appellant argued that the adjudicating authority did not adhere to the terms of removal in the second round of litigation, emphasizing their bonafide belief that the activity did not amount to manufacture. However, the Tribunal did not find this argument compelling in upholding the duty liability.

5. The Tribunal partially allowed the appeal, maintaining the duty liability on the appellant's activity but reducing the penalty imposed from ?4 lakhs to ?1 lakh. The Tribunal considered the uncertainty of the law claimed by the appellant in determining the penalty amount, providing relief to the appellant in this regard. The rest of the order was sustained, granting the appellant partial relief in the appeal.