1998 (11) TMI 336 - AT - Central Excise

Power - Use of power - Manufacture of thinner - Confiscation of plant and machinery and penalty - Manufacture

Summary

Issues:
- Duty demand on thinners manufactured with the aid of power
- Confiscation of electric motor pumps and pipelines
- Imposition of penalty for mis-declaration and suppression of facts
- Interpretation of Notification No. 230/86 regarding exemption for goods made without the aid of power
- Consideration of Modvat credit claim

Duty Demand on Thinners Manufactured with the Aid of Power:
The appeal challenged a duty demand of Rs. 11,74,450.94 imposed by the Collector of Central Excise on thinners manufactured by the appellants with the aid of power. The Central Excise officers found evidence of power usage in the manufacturing process, leading to the duty demand. The appellants argued that power was only used to pump raw materials, not in the actual manufacturing process. However, the Tribunal referred to a previous Supreme Court judgment emphasizing that any operation involving power in relation to manufacturing constitutes manufacturing with the aid of power. Consequently, the duty demand was upheld.

Confiscation of Electric Motor Pumps and Pipelines:
The confiscation of two electric motor pumps and pipelines under Rule 173Q was upheld by the Tribunal. These items were used in the manufacture of thinners, for which the appellants wrongly claimed exemption under Notification No. 230/86. Although the confiscation was upheld, the redemption fine was reduced to Rs. 10,000 considering the overall circumstances of the case.

Imposition of Penalty for Mis-Declaration and Suppression of Facts:
A penalty of Rs. 1,50,000 was imposed due to the suppression of the fact that thinners were manufactured with the aid of power and the mis-declaration in the classification list claiming exemption under the notification. The appellants were found to have acted malafidely by dismantling the power-related installations after the initial visit by officers. The penalty amount was reduced to Rs. 50,000 by the Tribunal.

Interpretation of Notification No. 230/86:
The Tribunal analyzed the interpretation of Notification No. 230/86, which grants exemption to goods made without the aid of power. The appellants argued for a narrow interpretation, contending that power usage in lifting raw materials should not disqualify them from the exemption. However, the Tribunal cited relevant Supreme Court judgments to establish that any power usage in the manufacturing process, even for preliminary operations like raw material transfer, constitutes manufacturing with the aid of power, thus disqualifying the appellants from the exemption.

Consideration of Modvat Credit Claim:
The Tribunal remanded the case to the Commissioner of Central Excise for further consideration of the appellants' claim for Modvat credit. The decision was based on the absence of crucial information regarding the nature of inputs used in manufacturing thinners. The Tribunal directed the Commissioner to verify the necessary details before making a decision on the Modvat credit claim.

This detailed analysis of the judgment from the Appellate Tribunal CEGAT, New Delhi covered the duty demand, confiscation of equipment, penalty imposition, interpretation of the notification for exemption, and the consideration of Modvat credit, providing a comprehensive overview of the legal issues addressed in the case.