1998 (10) TMI 177 - AT - Central Excise

Summary

Issues:
- Interpretation of Tariff sub-heading 72.15 regarding duty demand on goods obtained by breaking of "barges"
- Whether breaking of barges constitutes a manufacturing activity
- Validity of invoking the extended period of limitation under proviso to Section 11A(1) of the Central Excise Act, 1944
- Allegations of fraud, collusion, wilful mis-statement, or suppression of facts
- Applicability of excise duty on goods obtained by breaking up of ships, boats, and other floating structures
- Whether ship breaking activity falls under the definition of "manufacture" under Section 2(f) of the Central Excise Act
- Requirement of a separate Chapter Note/Section Note for ship breaking as a manufacturing activity
- Imposition of penalties under the impugned orders

Analysis:
1. The Appeals involved the interpretation of Tariff sub-heading 72.15 concerning duty demand on goods obtained by breaking "barges." The appellants argued that barges should not be considered as "ships, boats, or other floating structures" under this sub-heading, citing distinctions in Chapter sub-heading 89.01 and relevant case law.

2. The debate centered on whether breaking of barges amounts to a manufacturing activity. The appellants contended that cutting and breaking do not result in a new product, referencing case law and Tribunal judgments to support their stance.

3. The validity of invoking the extended period of limitation under Section 11A(1) was questioned, with the appellants claiming a bona fide belief that breaking up of barges did not attract excise duty. They argued against allegations of fraud or suppression of facts, citing relevant case law to support their position.

4. The respondents defended the duty demand, asserting that goods obtained by breaking up of ships, boats, and other floating structures are subject to excise duty under Tariff sub-heading 72.15. They argued that the inclusion of barges is implicit in the sub-heading and that the extended limitation period was rightly applied due to non-compliance.

5. The question of whether ship breaking activity falls within the definition of "manufacture" under Section 2(f) of the Central Excise Act was raised. The respondents emphasized that once goods are identified as excisable, their manufacturing status is irrelevant, citing relevant case law to support their stance.

6. The necessity of a separate Chapter Note/Section Note for ship breaking as a manufacturing activity was debated. The respondents argued that such clarifications were unnecessary when the tariff unambiguously identified certain goods as excisable.

7. The Tribunal analyzed the relevant tariff headings, concluding that goods obtained by breaking up of ships, boats, and other floating structures are liable to duty under Tariff sub-heading 72.15, encompassing barges as well. The generic description of "ships, boats, and floating structures" in Chapter 89 includes barges.

8. The Tribunal rejected arguments against the limitation period post the Central Excise Tariff Act, 1985, and affirmed that ship breaking constitutes a manufacturing activity, warranting excise duty. The absence of doubt in the tariff entries precluded the need for additional clarifications.

9. Regarding penalties imposed, the Tribunal found them reasonable, approximately 10% of the duty demand, and declined to interfere with the penalty amounts in the impugned orders.

10. Consequently, the Tribunal dismissed the Appeals and upheld the impugned order, affirming the duty demand on goods obtained by breaking up of ships, boats, and other floating structures, including barges, as a manufacturing activity subject to excise duty.