1990 (10) TMI 206 - AT - Central Excise

Summary

Issues:
1. Classification of manufactured goods under Central Excise Tariff.
2. Liability to pay duty on manufactured goods.
3. Date from which liability to pay duty arises.
4. Imposition of penalty and confiscation of goods.

Classification of manufactured goods under Central Excise Tariff:
The case involved the classification of pasting gum and corrugating gum manufactured by the appellants under the Central Excise Tariff. The Collector of Central Excise confirmed the demand for duty under Item 15C of the Central Excise Tariff, which covers starch and modified starch. The chemical examiner's report supported the view that the physical and chemical properties of the starch were modified during the manufacturing process, making the end product distinct from the raw materials. The Tribunal upheld the classification under Item 15C, emphasizing that the end product had a separate commercial identity from the raw materials used.

Liability to pay duty on manufactured goods:
The appellants argued that imposing duty on their products made from duty-paid starch and dextrine under Item 15C would result in double taxation. However, the Tribunal rejected this argument, stating that the modification of the raw materials during manufacturing justified the imposition of duty. The Tribunal also noted that the goods were not sold in their original form but underwent further processing to create a different product suitable for industrial use. The Tribunal relied on the Supreme Court's decision to support the classification of the goods under Item 15C of the Central Excise Tariff.

Date from which liability to pay duty arises:
The appellants claimed that their factory became power-operated only from 1-8-1984, and therefore, duty should only be levied from that date. The Tribunal accepted the evidence provided by the appellants, including a letter from the electricity department confirming the power connection date. The Tribunal found that the liability to pay duty on goods manufactured in the factory under Item 15C would commence from 1-8-1984. The demand for duty was adjusted accordingly based on the established date of power operation.

Imposition of penalty and confiscation of goods:
The Tribunal considered the appellants' argument that there was no suppression of facts as they had maintained proper records. The Tribunal acknowledged the mitigating factor of maintaining records but upheld the confiscation of goods and imposition of a penalty for manufacturing excisable goods without the required Central Excise license. The penalty was reduced to Rs. 1,000 due to the appellants being a small-scale unit. The Tribunal concluded the appeal by affirming the confiscation of goods and the adjusted duty liability based on the power operation date.

In conclusion, the Tribunal ruled in favor of the Department regarding the classification and liability to pay duty on the manufactured goods. The Tribunal adjusted the duty liability based on the established date of power operation and upheld the penalty and confiscation of goods for non-compliance with Central Excise regulations.