1999 (10) TMI 122 - AT - Central Excise

Summary

Issues:
Interpretation of Notification No. 1/93 and its application to job work basis manufacturing.

Detailed Analysis:
The case involved two appellants, M/s. Super Poly Fabrics Ltd. and M/s. Fine Fabricators, both manufacturers of HDPE bags and sacks under Chapter Heading 39 of the Central Excise Tariff Act, 1985, who availed the benefit of SSI exemption Notification No. 1/93. The dispute arose when the Department issued a show cause notice proposing a duty demand on the grounds that plastic strips emerged during the manufacturing process, which were not covered under the exemption notification. The Additional Collector confirmed the duty demand, and penalties were imposed on the appellants, leading to the present appeals challenging the order.

The appellants argued that the exemption under Notification No. 1/93 should apply only after crossing the exemption limit of Rs. 30 lakhs for final products cleared, excluding clearances for captive consumption. They contended that the intention of the notification was to extend the exemption to inputs captively consumed in the manufacturing process. Additionally, they highlighted that the job work basis under Notification No. 83/94 aimed to extend the exemption facility to job workers' premises. The appellants emphasized that the demand should be against the supplier of the granules if plastic strips were considered dutiable products.

On the other hand, the Department asserted that duty should be paid on plastic strips manufactured during the intermediate stage, as they were not covered under the specified goods of Notification No. 1/93. The Department argued that the job work was limited to processing or finishing the material supplied and did not include manufacturing activities on behalf of the raw material supplier. It was contended that the appellants, as job workers, were liable to pay excise duty on the plastic strips consumed during the manufacturing process.

The Tribunal rejected the appellants' contentions, stating that the exemption under Notification No. 1/93 could not be extended to intermediate goods manufactured during job work. The Tribunal upheld the duty demand on M/s. Super Poly Fabrics. However, regarding the penalties imposed, the Tribunal found that they were not warranted as the appellants had contested the duty demand on legal grounds, and therefore, set aside the penalties.

In conclusion, the Tribunal confirmed the duty demand on M/s. Super Poly Fabrics but set aside the penalties imposed on both appellants. The impugned order was upheld with the modifications related to the penalties, and the appeals were disposed of accordingly.