2017 (9) TMI 152 - AT - Central Excise

Manufacture - conversion of granules into moulding powder - penalty - Held that - the question of whether the powdering of Low Density Polyethylene (LDPE) and High Density Polyethylene (HDPE) granules into moulding powder would amount to manufacture went for determination right up to before the Hon ble Supreme Court when it was determined by the Hon ble Apex Court that as a consequence of new definition of manufacture in terms of Section 2(f), the activity which otherwise do not amount to manufacture, can now be termed as manufacture and thus liable to duty. This was with reference to Chapter Note 6(b) of Chapter 39 of the Central Excise Tariff Act, 1995 - the penalty not leviable - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether extended period of limitation is applicable.
- Valuation of the moulding powder.
- Imposition of penalty beyond the remand order.

Analysis:

Issue 1: Extended Period of Limitation
The case involved a dispute regarding the extended period of limitation under the Central Excise Act, 1944. The Hon'ble Supreme Court had remanded the matter to determine the duty liability of moulding powder and the question of limitation in relation to a specific show cause notice. The adjudicating authority imposed a penalty despite finding that the demand was within the normal period of limitation. The Tribunal held that the imposition of penalty was unsustainable as it exceeded the scope of the remand order.

Issue 2: Valuation of Moulding Powder
The controversy also revolved around the valuation of the moulding powder. The activity of converting granules into powder was deemed as manufacture, making the product excisable. The appellants argued that they did not engage in any new activity and all relevant facts were known to the Department. The Tribunal agreed with the appellants, highlighting that the process was already determined as manufacture by the Hon'ble Supreme Court. Additionally, since the second show cause notice was within the statutory limit and no extended period was applied, the penalty was deemed unjustified.

Issue 3: Imposition of Penalty
Regarding the imposition of penalty, the adjudicating authority had based its decision on the appellants' purchase of moulding powder from outside without fulfilling registration and classification requirements. However, the Tribunal found that the appellants were aware of the excisability of the product and had not engaged in any intentional evasion. The Tribunal emphasized that the penalty was not justified given the circumstances and the absence of extended period application.

In conclusion, the Tribunal upheld the demand for duty and interest but set aside the penalty imposed on the appellants. The decision highlighted the importance of adhering to the scope of remand orders and ensuring that penalties are justified based on the specific circumstances of each case.