1987 (5) TMI 148 - AT - Central Excise

Summary

Issues Involved:
1. Entitlement to concessional rate of duty under notification No. 198/76-CE.
2. Determination of the actual manufacturer of the packaged tea.
3. Validity of the demands for differential duty.

Issue-Wise Detailed Analysis:

1. Entitlement to Concessional Rate of Duty under Notification No. 198/76-CE:
The six appellant firms obtained L-4 licenses for manufacturing packaged tea and filed the necessary declarations and classification lists under notification No. 198/76-CE dated 16-6-1976. They removed the packaged tea on payment of the concessional rate of duty. The Department issued show cause notices alleging that the appellants were manufacturing and clearing packaged tea on behalf of others (suppliers of loose tea) and thus were not entitled to the concessional rate of duty. The Assistant Collector upheld the Department's claim, and the Appellate Collector rejected the appeals. However, the Tribunal found that the appellants were the actual manufacturers and entitled to the concessional rate of duty under the notification.

2. Determination of the Actual Manufacturer of the Packaged Tea:
The core issue was whether the appellants or the suppliers of loose tea were the manufacturers of the packaged tea. The Tribunal referred to several precedents to determine the manufacturer, emphasizing that packaging constitutes a manufacturing process under T.I. 3(2) CET. The Tribunal analyzed cases like Gangadhar Ramchander, Andhra Pradesh Re-Rolling Mills, Philips India Ltd., Poona Bottling Co. Ltd., Modo Plast (P) Ltd., Lucas Indian Service Ltd., Metal Box India Ltd., Shakti Udyog, Techma Engineering Enterprises, Kalsi Tyres (Chandigarh) Pvt. Ltd., H. Guru Instrument (P) Ltd., and P.M. Abdul Latif. The consistent finding was that the processor or packager (appellants in this case) is the actual manufacturer unless proven to be a mere dummy for the raw material supplier. The Assistant Collector's findings indicated that the appellants were distinct legal entities with their profit margins, not dummies for the suppliers.

3. Validity of the Demands for Differential Duty:
The Tribunal scrutinized the Assistant Collector's and Appellate Collector's conclusions. The Assistant Collector's finding that the appellants received remuneration, including profit, indicated that they were independent entities. The Tribunal rejected the notion that the appellants were mere labor contractors. The Appellate Collector's observation that the appellants were paid labor charges only was incorrect. The Tribunal noted the inconsistency in the Department's stand, where the brand name owners were considered manufacturers, yet the duty was demanded from the appellants. The Tribunal concluded that the appellants were the actual manufacturers and entitled to the concessional rate of duty, making the demands for differential duty unjustified.

Conclusion:
The Tribunal held that the appellants were the manufacturers of the packaged tea and entitled to the concessional rate of duty under notification No. 198/76-CE. The orders of the lower authorities were set aside, and the appeals were allowed with consequential relief.