1997 (1) TMI 180 - AT - Central Excise

Summary

Issues:
Dispensation of pre-deposit of duty amount and penalty for the appellant company and three other companies, manufacturing activity of sewing thread, applicability of notifications 46/86 and 26/94, financial position of the appellants, evidence of manufacturing by M/s. Diamond Thread Mills, penalty under Rule 209A, financial status of M/s. Diamond Thread Mills and other companies.

Analysis:
The appellant sought dispensation of pre-deposit of duty amount and penalties for their company and three others, arguing that the winding of yarn into sewing thread did not constitute manufacturing. They claimed that no new commodity emerged, and even if it did, they were entitled to the benefit of certain notifications. The Department contended that the winding process was deemed manufacturing under the Central Excise Act and cited evidence that the yarn was manufactured by M/s. Diamond Thread Mills. The Tribunal noted that the winding process was indeed manufacturing, and the notifications must be read harmoniously. They upheld the Lower Authority's decision that the benefit of the notification for sewing thread manufacture was not applicable, as legislative intent must prevail unless explicitly ruled out. The Tribunal found that the appellants had indeed manufactured the goods in question based on the evidence presented.

Regarding the penalty under Rule 209A, the appellants were penalized for raising invoices in the names of other companies. The Tribunal found no infirmity in the Lower Authority's decision, noting that the sales amounts would naturally be entered in the other companies' accounts. The appellants argued lack of hard evidence and denied any connection with the other companies. However, the Tribunal upheld the penalty decision based on the available evidence.

In terms of the financial position, M/s. Diamond Thread Mills was a profit-making concern with substantial assets. The Tribunal ordered a pre-deposit of a specified amount for both M/s. Diamond Thread Mills and the other companies, with the balance of the duty demanded and penalties waived pending appeal. The compliance deadline was set, and recovery of the remaining amounts stayed pending further proceedings. The financial status of the appellants played a significant role in determining the pre-deposit amounts and the dispensation of penalties, considering their profit-making nature and assets on hand.