2018 (3) TMI 852 - HC - Central Excise

Manufacture or service - catering services, according to the Revenue, amount to manufacture of edible preparation and supply of food preparation/materials to various airlines, served on board of aircrafts - Held that - A party should not be left guessing nor a higher court speculating as to whether the tribunal decided the matter by holding that the activity amounts to manufacture and yet not sustained the demand in terms of the adjudication order on the ground of limitation. Precisely, that has happened in this case. The tribunal erred in law in not completely deciding the matter, but remanding it to the Commissioner by rendering a partial conclusion - The matter now stands remanded to the adjudicating authority for adjudication of the show cause notice afresh on merits and in accordance with law - appeal allowed by way of remand.

Summary

Issues:
1. Classification of catering services as manufacture of edible preparation and liability to pay central excise duty.
2. Adjudication of show cause notice regarding central excise duty on food preparations cleared to airlines.
3. Tribunal's decision on whether the activity amounts to manufacture and the invocation of the extended period of limitation.
4. Imposition of penalty based on the findings of the tribunal.

Analysis:
1. The issue at hand revolves around the classification of catering services provided by the respondents as the manufacture of edible preparation, leading to the liability to pay central excise duty. The Revenue contended that the meals prepared by the respondents fell under Chapter 21 of the Central Excise Tariff Act, 1985, making them excisable goods. The show cause notice issued to the assessee demanded central excise duty for a specific period, alleging non-payment during that time frame.

2. The adjudicating authority held that the food preparations were classifiable under a particular chapter sub-heading, leading to the duty demand. However, the tribunal, in its order, pointed out that the authority did not conclusively establish whether the activity of the assessee amounted to manufacture. The tribunal raised concerns about the lack of a definite finding on this crucial aspect.

3. The tribunal's decision on whether the activity amounts to manufacture and the invocation of the extended period of limitation became a pivotal issue. The tribunal opined that the extended period was not invokable as the assessee had not clearly declared the activity as manufacture. The tribunal's findings were deemed peculiar by the Revenue's counsel, highlighting the lack of a definitive conclusion on the manufacturing aspect.

4. The imposition of penalty based on the tribunal's findings was a contentious issue. The tribunal's indecisiveness on whether the activity constituted manufacture led to confusion regarding the duty demand and the subsequent penalty imposition. The High Court, after thorough consideration, set aside the penalty imposed, emphasizing the need for absolute proof of duty liability before penalty imposition.

In conclusion, the High Court quashed the tribunal's order, remanding the matter to the adjudicating authority for a fresh adjudication of the show cause notice. The court clarified that no opinion was expressed on whether the activity constituted manufacture or if the extended period could be invoked for duty demand. The penalty imposition was rightly set aside, and the matter was directed to be re-adjudicated without influence from previous decisions.