1997 (6) TMI 102 - AT - Central Excise

Summary

Issues:
- Whether the activity of purchasing duty paid snuff, mixing, and selling it in bulk and smaller packages amounts to manufacture on which duty is payable.
- Whether the appellants' argument that a 500 gms. pack of snuff cannot be considered a retail pack is valid.
- Whether the activity of blending various snuff to make them marketable qualifies as "any other treatment" under Chapter Note 2 of Chapter 24.
- Whether the penalty imposed on the appellants should be upheld or reduced based on the circumstances.

Analysis:

1. The appellants were engaged in purchasing duty paid snuff, mixing it, and selling it in bulk and smaller packages without paying duty. A show cause notice alleged that this activity amounted to manufacture of snuff on which duty was payable. The Additional Collector confirmed the duty demand of Rs. 33,615/- and imposed a penalty of Rs. 8,000/- on the appellants, leading to the present appeal against this order.

2. The appellants argued that a 500 gms. pack of snuff cannot be considered a retail pack, as consumers typically buy snuff in smaller quantities. However, the Revenue contended that the size of containers in the retail market varies, and consumers may purchase larger quantities. The Revenue also referred to Chapter Note 2 of Chapter 24, which states that any treatment to render products marketable amounts to manufacture.

3. The Tribunal considered Chapter Note 2, which specifies that repacking from bulk packs to retail packs or any treatment to make products marketable qualifies as manufacture. While consumers usually buy snuff in small quantities, the activity of blending various snuff types to make them marketable falls under the definition of manufacture. The Tribunal held that the appellants' activity of mixing and selling snuff did amount to manufacture, making the resultant products liable for duty.

4. Regarding the penalty imposed, the appellants claimed they had no intention to evade duty and believed their activity did not amount to manufacture. They cited a Supreme Court judgment in support of waiving the penalty. The Revenue argued that the appellants violated the law, justifying the penalty. Considering the circumstances, the Tribunal reduced the penalty from Rs. 8,000/- to Rs. 4,000/- based on the totality of the situation.

5. In conclusion, the Tribunal upheld the duty demand on the appellants for their manufacturing activity of mixing and selling snuff, considering it as manufacture under Chapter Note 2. The penalty was reduced from Rs. 8,000/- to Rs. 4,000/- due to the appellants' belief and the circumstances of the case.