1999 (6) TMI 163 - AT - Central Excise

Summary

Issues:
1. Waiver of pre-deposit of duty demanded on converting unmanufactured tobacco leaves into tobacco powder/granules.
2. Imposition of penalties on individuals supplying unmanufactured tobacco for the job work.
3. Waiver of penalties imposed on individuals.
4. Interpretation of Chapter Note 2 of Chapter 24 regarding the process amounting to manufacture.

Analysis:

1. The main issue in this case was the waiver of pre-deposit of duty amounting to Rs. 52,35,225.26 demanded for converting unmanufactured tobacco leaves into tobacco powder/granules. The appellant, Shree Prasad Grinding Mills, argued that no manufacturing activity was involved in the process as they received unmanufactured tobacco and only performed cutting using a chopper. They relied on a previous Tribunal judgment and a subsequent Apex Court decision to support their contention that no duty liability was involved in such activities.

2. Another issue raised was the imposition of penalties on individuals, Srikant Prasad & R.K. Agarwal, who supplied unmanufactured tobacco for the job work. The appellant's advocate argued that there should be no penalty imposed on these suppliers as no manufacturing activity was undertaken by them.

3. Additionally, the appellants Akram Kidwai and Imran Ahmed sought a waiver of penalties of Rs. 1 lakh and Rs. 10,000 respectively, claiming that there was no basis for imposing penalties on them as well.

4. The interpretation of Chapter Note 2 of Chapter 24 regarding the process amounting to manufacture was a crucial aspect of the case. The Revenue relied on this chapter note to argue that the process of chopping the tobacco into smaller pieces rendered it marketable, thus constituting a manufacturing process. However, the appellant's advocate pointed out that this chapter note was introduced after the relevant period and should not be applied retroactively. Moreover, it was argued that the chapter note assumed the product to be non-marketable initially, which was not the case with the tobacco leaves received by the appellant.

In the final judgment, the Tribunal considered the arguments from both sides and agreed with the submissions of the appellant's advocates. Consequently, the stay petitions were allowed unconditionally, indicating that the duty waiver and penalty waivers requested by the appellants were granted based on the interpretation of the relevant legal provisions and precedents cited during the proceedings.