1999 (11) TMI 548 - AT - Central Excise

Summary

Issues:
1. Whether cutting, stitching, and cording of cotton fabrics to produce bedsheets and pillow covers amount to manufacture under Central Excise Law.
2. Classification of bed sheets under old and new Central Excise Tariffs.
3. Allegation of clandestine removal of bed sheets due to non-payment of duty.
4. Applicability of duty on bed sheets before and after 1-3-1986.
5. Duplication of time period for duty confirmation.
6. Quantification of duty and penalty imposition.

Issue 1:
The Collector held that activities like cutting, stitching, and cording of cotton fabrics to create bedsheets and pillow covers constitute manufacturing under Central Excise Law, confirming a demand and imposing a penalty on the appellants. However, the Tribunal analyzed the classification of bed sheets under the old and new Central Excise Tariffs to determine the liability for duty.

Issue 2:
The appellants argued that bed sheets were classified differently before and after 1-3-1986, with a change in the classification of cotton fabrics and bed sheets under distinct chapter sub-headings. The Tribunal noted that bed sheets were chargeable to duty under a separate heading post-1-3-1986, leading to a different duty liability for the period in question.

Issue 3:
The Department alleged clandestine removal of bed sheets due to non-payment of duty, emphasizing the duty liability on the manufactured products. The Tribunal considered the duty payment status of the cotton fabrics used in making the bed sheets and found no evidence of non-payment, thereby impacting the duty demand on the bed sheets.

Issue 4:
Before 1-3-1986, bed sheets were considered part of cotton fabrics under the Central Excise Tariff, leading to no additional duty if the fabrics were already duty paid. However, post-1-3-1986, bed sheets were classified separately, necessitating duty payment as a distinct item. The Tribunal clarified the duty liability based on the period-specific classification and duty requirements.

Issue 5:
The Tribunal identified a duplication of time period for duty confirmation, as one order had already determined duty from 1-4-1986 to 13-12-1986. Consequently, the duty liability was limited to the period from 1-3-1986 to 31-3-1986, requiring a remand to the Commissioner for quantification of duty for that specific timeframe.

Issue 6:
Considering the findings and circumstances, the Tribunal reduced the penalty imposed on the appellants to Rs. 5,000. The appeal was disposed of with a directive for duty quantification for the period 1-3-1986 to 31-3-1986, emphasizing the duty liability based on the revised classification of bed sheets under the Central Excise Tariff.