2024 (6) TMI 182 - AT - Central Excise

Levy under Central Excise Act, 1944 - Process amounting to manufacture or not - re-packing and labelling of unmanufactured tobacco - HELD THAT - A key element in fastening recovery of duty is determination of the appropriate tariff item in the Schedule to Central Excise Tariff Act, 1985; from the contents of the impugned order, we are unable to ascertain the reason for inferring that the impugned goods are covered by tariff item 4707 9000 of Schedule to Central Excise Tariff Act, 1985 in accord with the General Rules for Interpretation of the Tariff. There is also no finding as to the impact of the definition of manufacture on section 3 of Central Excise Act, 1944 and its applicability to the process undertaken by the appellant de hors the amendment to excisable goods which has no bearing on taxability but only on the rate of duty. In the absence of these critical evaluations, the impugned order cannot be adjudged as being legal and proper. That must be rectified and to enable that, it is necessary to set aside the impugned orders - appeals of the assessee restored before Commissioner of Central Excise Customs (Appeals), Aurangabad for a fresh hearing and decision - appeal allowed by way of remand.

Issues involved: The judgment involves the dispute regarding duty liability under the Central Excise Act, 1944 for the appellant, M/s Fasttrack Packers Pvt Ltd, related to the re-packing and labeling of 'unmanufactured tobacco' leading to the generation of waste paper, which was the cause of contention with the central excise authorities.

Details of the Judgment:

1. The dispute centered around the distinction between 'manufacture' and 'excisable' goods, with the appellant engaged in re-packing and labeling activities involving 'unmanufactured tobacco.' The waste paper generated during this process was the subject of duty liability contention. The central excise authorities emphasized the marketability of the waste paper as a basis for taxability, citing judicial precedents and the concept of 'manufacture.' The original authority confirmed duty liability, interest, and penalties for the appellant, which was upheld in the order-in-appeal by the Commissioner of Central Excise & Customs (Appeals), Aurangabad.

2. The appellant challenged the duty liability based on the definitions of 'manufacture' and 'excisable goods' under the Central Excise Act, 1944. The appellant argued that the lack of an Explanation similar to section 2(d) precluded its relevance, and the tax should be sanctioned only if both conditions were satisfied. The appellant highlighted discrepancies in the treatment of similar cases by other appellate authorities, where demands were set aside.

3. The Tribunal observed that similar demands for the appellant in other jurisdictions had been resolved favorably at the first appellate authority level, which the current authority seemed unaware of. The Tribunal noted that the first appellate authority did not adequately consider the decisions cited by the appellant and relied heavily on a specific case without contextual analysis. The Tribunal found deficiencies in the evaluation of the appropriate tariff item, the impact of the definition of 'manufacture,' and the applicability of the amendment to 'excisable goods.'

4. In light of the above, the Tribunal set aside the impugned orders and remanded the appeals to the Commissioner of Central Excise & Customs (Appeals), Aurangabad for a fresh hearing. The Tribunal directed a comprehensive review of all issues, ensuring compliance with principles of natural justice, and kept all issues open for reconsideration.

5. The appeals were allowed by way of remand, with the order pronounced in the open court on 05/06/2024.

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