1995 (3) TMI 239 - AT - Central Excise

Summary

Issues Involved:
1. Whether printing, coating, and backing with paper constitute a process of manufacture.
2. Whether printed, coated, and paper-backed aluminum foils are considered manufactured goods.
3. Applicability of exemption under Notification No. 155/72 and Notification No. 183/84.
4. Whether the extended period under Section 11A of the Central Excises and Salt Act, 1944, is applicable.
5. Imposition of penalty under Rule 173Q of the Central Excise Rules, 1944.

Detailed Analysis:

1. Process of Manufacture:
The primary issue was whether the processes of printing, coating, and backing with paper could be considered as manufacturing. The Tribunal found that these processes indeed constitute manufacturing because the resultant product, i.e., printed, coated, and paper-backed aluminum foils, is distinct from the bare aluminum foils. This conclusion aligns with the Supreme Court's ruling in the case of Union of India v. Delhi Cloth and General Mills Co. Ltd., where it was held that manufacturing implies a transformation resulting in a new and different article with a distinctive name, character, or use.

2. Manufactured Goods:
The Tribunal examined whether the printed, coated, and paper-backed aluminum foils qualify as goods. It was observed that for a product to be considered goods, it must be marketable. The Tribunal cited the Supreme Court's decision in Union Carbide India Ltd. v. U.O.I., which held that goods must be capable of being brought to the market for buying and selling. The Tribunal concluded that the printed, coated, and paper-backed aluminum foils are indeed distinct and marketable products, thus qualifying as goods.

3. Exemption under Notifications:
The appellants argued that even if the foils are considered goods, they should be exempt from duty under Notification No. 155/72 and Notification No. 183/84, provided the total quantity of bare aluminum foils used did not exceed 5 MT during the preceding financial year. The Tribunal found that the appellants met this condition, as the weight of bare aluminum foils used never exceeded 5 MT. Therefore, the Tribunal held that the printed, coated, and paper-backed aluminum foils were exempt from duty under the cited notifications.

4. Extended Period under Section 11A:
The Tribunal addressed whether the extended period for demand under Section 11A of the Central Excises and Salt Act, 1944, could be invoked. The Tribunal noted that no allegations of suppression, willful misstatement, or intent to evade duty were brought out in the show cause notice. Citing the Supreme Court's ruling in Cosmic Dye Chemical, the Tribunal held that the extended period could not be invoked in the absence of proven intent to evade duty.

5. Imposition of Penalty:
Regarding the penalty imposed under Rule 173Q, the Tribunal considered the appellants' bona fide belief that the printed, coated, and paper-backed aluminum foils were not goods. The Tribunal referenced the Supreme Court's decisions in Hindustan Steel Limited and Cement Marketing Co. of India, which held that penalties should not be imposed for technical or venial breaches or where there is a bona fide belief of non-liability. The Tribunal concluded that no penalty should be imposed on the appellants, given their bona fide belief and the supporting judgments.

Conclusion:
The Tribunal allowed the appeal, set aside the impugned order, and granted consequential relief in accordance with the law. The key findings were that the processes of printing, coating, and backing with paper constitute manufacturing, the resultant foils are marketable goods, the exemption under the relevant notifications applies, the extended period for demand under Section 11A is not applicable, and no penalty should be imposed.