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2019 (10) TMI 683 - AT - Central ExciseProcess amounting to manufacture - whether the activity carried out in the Daman factory of cutting/slitting of jumbo rolls of plain PVC Sheets into smaller rolls and printing of the same amounts to manufacture or otherwise? HELD THAT - Tribunal in the case of M/S BOMBAY KUNSTSTOFF PHARMA SUPPLIES P. LTD., JUSTIN MARTIN VERSUS C.C.E. S.T. DAMAN 2018 (8) TMI 14 - CESTAT AHMEDABAD where it was held that the activities of printing of PVC sheet by the Appellant does not amount to manufacture. - once it is held that PVC sheets cleared by Thane unit was a final product and activity of cutting/slitting and printing carried out at Daman unit did not amount to manufacture, then question of paying duty on printing charges by the Appellant did not arise. The appeal filed by the department before the Supreme Court was dismissed in COMMNR. OF CENTRAL EXCISE, MUMBAI VERSUS M/S RAJPUROHIT GMP INDIA LTD. ORS. 2008 (10) TMI 7 - SUPREME COURT . The Supreme Court while upholding the decision of the Tribunal held that the activity of cutting and slitting sheets/films did not amount to manufacture. Once it is not in dispute that the matter was transferred to Call Book awaiting the aforesaid decision of the Hon ble Supreme Court, the Adjudicating Authority was in error in ignoring the ratio laid down by the Hon ble Supreme Court. Valuation - inclusion of amount towards assessable value of goods - HELD THAT - To include any amount towards assessable value of goods, there must first be manufacture to attract the charging section of the Central Excise Act and only then the valuation of goods under section 4 will have to be looked into - In the present case, since the activity of cutting/slitting and printing of PVC sheets does not amount to manufacture, the question of including any charges towards printing in the assessable value will not arise. In the present case as well the evidence relied upon in the form of price lists have been resumed from the residence of Mr. Omprakash who as per Appellant was never employed with them. Apart from that, the fact that cross examinations could not be conducted due to delay in adjudication cannot be overlooked - the price list and statements cannot be relied upon without being supported by direct evidence showing under valuation and receipt of cash as alleged and consequently it cannot be conclusively proved that the Appellant had received any amount in cash as alleged in the show cause notice. Be that as it may, the demand confirmed against the Appellant in any event is required to be set aside as the activity carried out at daman factory did not amount to manufacture. Time Limitation - HELD THAT - The allegations made in the show cause notice on the basis of receipt of cash towards printing charges by the Appellant is not supported by any corroborative evidence - the extended period of limitation cannot be invoked in the facts of the circumstances of the present case. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Whether the activity of cutting/slitting and printing of PVC sheets at the Daman unit amounts to manufacture. 2. Whether the demand confirmed against the appellant is sustainable due to the delay in adjudication. 3. Whether the evidence relied upon by the department is sufficient to prove the charge of undervaluation. 4. Whether the extended period of limitation can be invoked in the present case. Issue-wise Detailed Analysis: 1. Whether the activity of cutting/slitting and printing of PVC sheets at the Daman unit amounts to manufacture: The Tribunal examined whether the activities carried out at the Daman unit, including cutting/slitting and printing of PVC sheets, constituted manufacture. The appellant argued that these activities did not amount to manufacture, relying on several judicial precedents, including the Supreme Court’s decision in Caprihans India Ltd. The Tribunal agreed, citing consistent judicial findings that such activities do not result in a new and distinct product. The Tribunal noted that the PVC sheets remained the same after processing, and no new commodity was created. Consequently, the demand based on these activities was deemed unsustainable. 2. Whether the demand confirmed against the appellant is sustainable due to the delay in adjudication: The Tribunal addressed the significant delay in adjudication, noting that the show cause notice was issued in 1999, but the final order was passed in 2019. The appellant argued that the delay itself was grounds for setting aside the demand. The Tribunal referred to various judicial decisions, including Premier Ltd. v. Union of India, which emphasized the importance of timely adjudication. The Tribunal found that the delay was not justified, particularly since the matter was kept in the call book for an extended period without adequate explanation. The Tribunal concluded that the delay prejudiced the appellant’s ability to defend itself, thus warranting the setting aside of the demand. 3. Whether the evidence relied upon by the department is sufficient to prove the charge of undervaluation: The Tribunal scrutinized the evidence presented by the department, which included documents seized from a third party and statements from witnesses who could not be cross-examined due to the delay. The appellant contended that the evidence was insufficient and unreliable. The Tribunal agreed, noting that the reliance on third-party documents without independent corroboration was problematic. The Tribunal cited the Supreme Court’s decision in Andaman Timber Industries, emphasizing that statements could not form the sole basis of a demand in the absence of cross-examination. The Tribunal found that the department failed to provide conclusive evidence of undervaluation, leading to the dismissal of the demand. 4. Whether the extended period of limitation can be invoked in the present case: The Tribunal examined whether the extended period of limitation was applicable. The appellant argued that the facts were within the department’s knowledge, as similar show cause notices were issued to the Thane unit for overlapping periods. The Tribunal agreed, citing the Supreme Court’s decision in Nizam Sugar Factory, which held that the extended period could not be invoked if the facts were already known to the department. The Tribunal noted that the issue of whether the activities amounted to manufacture was already litigated and settled in favor of the appellant in previous cases. Therefore, the extended period of limitation was not applicable, and the demand was time-barred. Conclusion: The Tribunal set aside the impugned order, holding that the activities at the Daman unit did not amount to manufacture, the demand was unsustainable due to the delay in adjudication, the evidence was insufficient to prove undervaluation, and the extended period of limitation could not be invoked. The appeal was allowed with consequential relief.
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