1996 (11) TMI 250 - AT - Central Excise

Issues Involved:
1. Confirmation of excise duty demand and imposition of penalties.
2. Invocation of extended period under Section 11A for alleged suppression of facts.
3. Applicability of exemption notifications.
4. Classification of processes as 'manufacture'.

Issue-wise Detailed Analysis:

1. Confirmation of Excise Duty Demand and Imposition of Penalties:
The appellants, M/s. SPGC Metal Industries (P) Ltd., Virudhunagar, and its three Directors, challenged Order No. 4/89, dated 14-4-1989, passed by the Collector of Central Excise, Madurai, which confirmed an excise duty demand of Rs. 6,91,115.10 and imposed a penalty of Rs. 50,000/- each on the three Directors. The appellants argued that the containers manufactured were covered by exemption Notification No. 191/73-C.E. as amended by Notification No. 30/76-C.E., and that the non-power operated section was within the full knowledge of the Excise authorities.

2. Invocation of Extended Period Under Section 11A for Alleged Suppression of Facts:
The Show Cause Notice issued on 18-10-1988 alleged wilful suppression of facts regarding the manufacture and clearance of metal containers from the non-power operated section during the period 1983-84 to 1986-87. The appellants contended that the non-power operated section was established in 1976, with the power-operated section starting in 1977, and that they had been regularly filing classification lists and renewing their licenses. The Tribunal found that the Excise officers had been visiting the factory from time to time and that the site plan submitted to the Assistant Collector showed both sections, indicating no wilful suppression of facts. Therefore, the invocation of the extended period of limitation was unjustified, and the impugned order was set aside on this count alone.

3. Applicability of Exemption Notifications:
The appellants claimed that their clearances from the non-power operated section were wholly exempt from duty under Notification No. 71/83, dated 1-3-1983. The Tribunal found that metal containers were eligible for a 'Nil' rate of duty if no process was ordinarily carried on with the aid of power. However, since the black plate sheets used in the non-power operated section were lacquered and varnished in the power-operated section, the appellants could not claim the benefit of the exemption.

4. Classification of Processes as 'Manufacture':
The appellants argued that lacquering and varnishing of tin sheets did not amount to manufacture. The Tribunal referred to various decisions, including Garware v. Union of India and Azad Tin Factory (P) Ltd. v. Collector of Central Excise, which held that lacquering and varnishing do not change the identity of the tin sheets and, therefore, do not amount to manufacture. Based on these precedents, the Tribunal concluded that lacquering and varnishing did not constitute manufacturing processes in this context.

Conclusion:
The Tribunal allowed all four appeals, set aside the impugned order, and directed that the appellants be given all consequential reliefs. The decision was based on the findings that there was no wilful suppression of facts justifying the extended period of limitation, the exemption under Notification No. 71/83 was not applicable, and the processes of lacquering and varnishing did not amount to manufacture.

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