2003 (6) TMI 43 - AT - Central Excise

Manufacture - Dutiability - Marketability - Valuation (Central Excise) - Demand - Limitation - Penalty

Summary

Issues Involved:
1. Whether the process undertaken by M/s. Nu Tech Packaging amounts to manufacture.
2. Classification and valuation of the impugned product.
3. Whether the extended period of limitation for demanding duty is invocable.
4. Non-imposition of penalty and interest under Section 11AC and Section 11AB of the Central Excise Act.
5. Non-imposition of penalty and interest under Rule 57-I(4) and (5) of the Central Excise Rules, 1944.

Detailed Analysis:

1. Whether the Process Undertaken by M/s. Nu Tech Packaging Amounts to Manufacture:
The Tribunal held that the process of lamination/varnishing on printed/unprinted paper sheets by M/s. Nu Tech Packaging (NTP) amounts to manufacture. This conclusion was based on the principle that the process brings into existence a new and different article with a distinctive name, character, or use. The judgment referenced the Supreme Court's decision in Laminated Packaging (P) Ltd. v. CCE, which stated that lamination amounts to manufacture as it results in a distinct and different product known in the market. The Tribunal rejected the applicability of the J.G. Glass Industries case, emphasizing that the process in question creates a new commercial commodity.

2. Classification and Valuation of the Impugned Product:
The Tribunal classified the laminated/varnished paper sheets under Heading 48.11 of the Central Excise Tariff, which covers coated or covered paper or paperboard. The Tribunal found that the process of lamination/varnishing amounts to manufacture, and thus the resultant product falls under Heading 48.11. The Tribunal dismissed the applicability of Chapter 49, which pertains to printed paper, as the primary process involved lamination/varnishing, not merely incidental printing.

Regarding valuation, the Tribunal upheld the inclusion of packing charges in the assessable value, aligning with the Supreme Court's decision in the MRF case. The Tribunal also agreed with the inclusion of art and development charges in the assessable value, noting that these charges form part of the intrinsic value of the product. However, it directed that only proportional costs should be included, as per the decision in Mutual Industries Ltd. v. CCE.

3. Extended Period of Limitation for Demanding Duty:
The Tribunal upheld the invocation of the extended period of limitation, citing that M/s. NTP had not provided substantial documentation revealing that the department had knowledge of their manufacturing laminated sheets/varnished papers. The Tribunal emphasized that the goods found in excess in the factory premises were liable for confiscation as they were not entered in the RG-I register, and the goods found in the three-wheeler were liable for confiscation due to removal without debiting 10% of the value of inputs under Rule 57F.

4. Non-Imposition of Penalty and Interest under Section 11AC and Section 11AB of the Central Excise Act:
The Tribunal imposed a penalty on M/s. NTP but reduced the amount to Rs. 2 lakhs. It held that interest under Section 11AB would be applicable only from the date of insertion of the section in the Central Excise Act, i.e., 28-9-1996. The Tribunal found no grounds for imposing penalties on the Director and Manager of M/s. NTP, setting aside the penalties imposed on them under Rule 209A due to the absence of specific findings about their personal knowledge.

5. Non-Imposition of Penalty and Interest under Rule 57-I(4) and (5) of the Central Excise Rules, 1944:
The Tribunal concluded that the provisions of sub-rule (4) and (5) of Rule 57-I could not be invoked for imposing penalty and interest for not debiting an amount equal to 10% of the price of the inputs at the time of clearance for further job work. The Tribunal noted that the penalty already imposed had been reduced, and the Revenue's appeal for enhancing the penalty on account of packing charges was dismissed.

Conclusion:
The Tribunal's judgment comprehensively addressed the issues of manufacture, classification, valuation, limitation, and penalties. It upheld the process of lamination/varnishing as manufacture, classified the product under Heading 48.11, included packing and proportional art and development charges in the assessable value, invoked the extended period of limitation, and imposed penalties on M/s. NTP while setting aside penalties on individual directors and managers.