2000 (8) TMI 193 - AT - Central Excise

Summary

Issues:
1. Classification of products under sub-heading No. 3402.90
2. Manufacturing activity vs. re-packing and re-labelling argument
3. Application of chapter note 6 in chapter 34
4. Limitation period for demand confirmation
5. Justification of duty imposition
6. Personal penalty under section 11AC

Analysis:

1. The judgment involves the confirmation of duty demand on products classified under sub-heading No. 3402.90. The appellants argued that the products emerged from re-packing thinner, liquid paraffin, and Isoprophile Alcohol, which were originally classified under different tariff headings. They contended that mere re-packing and labelling did not result in the emergence of new products under heading 3402.90. The Revenue argued that the products, given specific names and purposes, were different commercial commodities from the raw materials. The Tribunal held that the products were cleaning preparations classifiable under heading 3402.90 based on their characteristics and uses, satisfying the tests laid down by previous cases.

2. The debate centered on whether the activity undertaken constituted manufacturing or re-packing and re-labelling. The appellants claimed they were not manufacturing but only re-packing and labelling the products. They cited a Tribunal decision stating that re-packing and re-naming a product did not amount to manufacturing if the nature and identity remained unchanged. The Revenue argued that the products were identifiable with different names, characteristics, and uses, thus constituting manufacturing. The Tribunal found that the products became fit for commercial use after processing, aligning with the introduction of chapter note 6 in chapter 34, which deemed re-packing and re-labelling as manufacturing activities.

3. The application of chapter note 6 in chapter 34 was crucial in determining whether the re-packing and labelling activities amounted to manufacturing. The appellants contended that since the raw materials were not classifiable under chapter 34 and their nature did not change after processing, the note did not apply. However, the Tribunal upheld the classification under heading 3402.90 based on the products' characteristics and commercial use, in line with previous decisions.

4. The issue of limitation arose concerning the period for which the duty demand was confirmed. The appellants argued that the show cause notice was issued beyond the limitation period, emphasizing a letter disclosing their activities in 1994. However, the Tribunal found that the letter did not provide a clear picture of the activities undertaken, as it did not reveal the products' new names, uses, or functions. Consequently, the larger limitation period was deemed applicable.

5. The justification for duty imposition was extensively debated, with the Revenue highlighting the specific names, uses, and packaging of the products to support their classification under heading 3402.90. The Tribunal agreed with the Revenue's arguments, concluding that the products were distinct commercial commodities from the raw materials, suitable for commercial use after processing.

6. Regarding the personal penalty under section 11AC, the Tribunal noted that the provision was not retrospective and could only be imposed from its introduction date in 1996. As the penalty period spanned before and after the provision's enactment, the Tribunal remanded the matter to the adjudicating authority to determine the penalty based on the duty quantum for each period.