1986 (1) TMI 239 - AT - Central Excise

Summary

Issues:
1. Whether the appellants processed 'man-made fabrics' attracting central excise duty without authorization?
2. Whether the process undertaken by the appellants constituted a new product or finishing process?
3. Whether the appellants were entitled to exemption under Notification No. 79/82-CE?
4. Whether the penalty and confiscation of goods imposed on the appellants were justified?

Analysis:

Issue 1:
The Collector held that the appellants processed 'man-made fabrics' with a curing machine, removed them without paying duty, and committed breaches. The appellants argued that their process was merely removing odors and not a new product. The department contended that the curing process attracted duty, relying on a Supreme Court judgment. The Tribunal found that the fabrics received were not marketable as printed saris until the appellants' heat treatment process, thus constituting manufacture.

Issue 2:
The Tribunal agreed with the Collector that the heat treatment process by the appellants was a finishing process, turning unfinished fabrics into marketable saris. Citing the Supreme Court, the Tribunal confirmed that the process amounted to manufacture under the Central Excises and Salt Act, attracting duty. The appellants were not entitled to exemption under Notification No. 79/82-CE due to using a machine for the process.

Issue 3:
Regarding penalties and confiscation, the Tribunal noted that the appellants had informed the authorities of their process and sought exemption, which was not replied to. Consequently, the penalty and confiscation were deemed unjustified, leading to their set aside. The Tribunal ordered a refund of the fine appropriated from the security deposit.

Conclusion:
The Tribunal upheld the demand for duty, considering the appellants' process as manufacturing. However, it set aside the penalty and confiscation, granting a refund of the appropriated fine. The appeal was decided in favor of the appellants on the penalty and confiscation issues.