1999 (7) TMI 368 - AT - Central Excise

Summary

Issues:
1. Waiver of deposit of duty and penalty under Section 11AC.
2. Whether the applicant is liable to pay duty for converting LDPE granules into powder.
3. Claim of exemption under Notification 1/93 for manufacturing plastic powder.
4. Applicability of penalty under Section 11AC post-September 1996.
5. Adequacy of communication regarding the manufacturing process to the department.
6. Independence of job workers and liability for duty payment.
7. Prima facie case for penalty waiver before September 1996.

Analysis:
1. The case revolves around the applicant's request for the waiver of deposit of duty amounting to approximately Rs. 42.53 lakhs and an equivalent penalty under Section 11AC. The duty was demanded due to the conversion of LDPE granules into powder without payment of duty, leading to a dispute regarding liability.

2. The duty demand is based on the contention that the applicant, either at its factory or through job workers, converted LDPE into powder, which amounts to manufacture, necessitating duty payment. The applicant argues that the job workers were independent, and duty was payable by them, not by the applicant. However, factors such as providing machinery, maintenance, and electricity charges reimbursement indicate a close relationship, raising questions about the job workers' independence.

3. Regarding the claim of exemption under Notification 1/93 for manufacturing plastic powder, the applicant asserts entitlement to the exemption based on previous Tribunal decisions and credits claimed on finished products and powder. The issue of communication to the department about the manufacturing process and the applicability of penalty under Section 11AC post-September 1996 are also debated.

4. The Departmental Representative argues that insufficient communication to the department about the manufacturing process raises doubts about the applicant's entitlement to exemptions and penalties. Lack of evidence supporting the communication and discrepancies in declarations further complicate the matter, casting uncertainty on the applicant's claims.

5. The independence of job workers is questioned due to the support provided by the applicant, such as machinery and electricity charges reimbursement, indicating a level of control or involvement that challenges the notion of complete independence. The judgment considers these factors in determining the liability for duty payment and penalty imposition.

6. Ultimately, the Tribunal directs the applicant to deposit Rs. 27 lakhs towards duty and penalty within a specified period, considering the prima facie case for penalty waiver before September 1996. The decision balances various aspects of the case, including communication adequacy, job worker independence, and exemption claims, to arrive at a resolution regarding duty payment and penalty imposition.

7. The compliance deadline is set, emphasizing the need for adherence to the Tribunal's directives within the stipulated timeframe to avoid further consequences or enforcement actions.