1995 (1) TMI 146 - AT - Central Excise

Summary

Issues Involved: Appeal against Central Excise duty demand on slitting of Jumbo Audio Magnetic Tapes, confiscation of seized spools, and imposition of penalty.

Central Issue - Manufacture and Duty Liability:
The main issue was whether slitting of jumbo rolls of audio tapes into smaller tapes of width not exceeding 6.5 mm constituted "manufacture" under Section 2(f) of the Central Excises and Salt Act, 1944, thereby attracting Central Excise duty. The appellants argued that slitting did not amount to manufacture, citing relevant case law. However, the respondents contended that the slitting process resulted in a new product with different characteristics, thus constituting manufacture and attracting duty liability. The Tribunal considered the classification under Tariff Item 59 and previous decisions to determine the manufacturing aspect.

Tariff Classification and Legal Precedents:
The Tribunal analyzed Tariff Item 59, specifically items related to sound and image recording articles, to assess the applicability of duty on the slitting process. Reference was made to previous judgments such as Dipen Textiles (P) Ltd. v. C.C.E. and Computer Graphics (Pvt.) Ltd. to establish the precedent that slitting jumbo rolls into smaller tapes can create a new marketable product, justifying duty liability. The Tribunal also referred to Supreme Court and Tribunal decisions emphasizing that any process resulting in identifiable goods constitutes manufacture, regardless of initial and final product classification under the same tariff entry.

Penalty Imposition and Bona Fide Belief:
The appellants argued that they had started the slitting activity in good faith and under the belief that it did not amount to manufacture. Considering this, the Tribunal concluded that the penalty imposed on the appellants was unwarranted and set it aside, while upholding the duty demand. The decision highlighted the appellants' genuine belief and the timing of their activity in relation to the investigation.

Conclusion:
Ultimately, the Tribunal upheld the Additional Collector's order confirming the duty demand of Rs. 39,375 but overturned the penalty of Rs. 20,000 imposed on the appellants. The appeal was disposed of with this decision, balancing the duty liability with the appellants' circumstances and beliefs.