Customs, Excise and Gold Tribunal - Mumbai
Anil Dang And Multiflex Lami Print Ltd. vs Commissioner Of Central Excise on 19 June, 2006
ORDER S.S. Sekhon, Member (T)
1.1 These appeals are filed by the company and its Managing Director aggrieved from the order of Commissioner holding the company liable to Central Excise duty & penalty under Rule 173A and Rule 25 of the Rules along with a demand of interest thereon & penalty of Rs. 10 lakhs imposed on the Managing Director under Rule 209A and Rule 26 of the Rules.
1.2 The company is engaged in the manufacture, inter alia, of 'plastic laminated film and pouches" at their factory at Mahad and hold necessary registration. They started a processing unit in Silvasa in their own name where manufacture of pouches falling under Heading 3923.90 was undertaken. They were carrying cut the activity of slitting and cutting of duty paid plastic laminated films, into smaller rolls up to August 2001, thereafter they stopped both these activities.
1.3 They had cleared plastic film on payment of duty to Silvasa unit. The jurisdictional officers issued a notice alleging that the said activity of slitting and cutting of duty paid jumbo rolls of these duty paid films was amounting to manufacture under the Central Excise Act, and duty would then get attracted once again on such products emerging at Silvasa.
1.4 He Commissioner, upheld the charges on the following:
(i) that because of the change of Commissioner, Personal Hearing was fixed on 20-10-2003 by the Commissioner before passing the order, but the Appellants did not avail of the opportunity giving a presumptive belief that they had nothing to say further.
(ii) that slitting of jumbo rolls into small rolls amounts to manufacture based on the following judgments:
a) - PRESTIGE ENGINEERING
b) - S.D.CHEMICALS P. LTD.
c) - J.G. GLASS INDUSTRIES LTD.
d) - EMPIRE INDUSTRIES
iii) that the said activity of cutting/slitting as per requirement of customers is covered under the expression "incidental to manufacture" under Section 2(f):
iv) that since, the Appellants did not obtain registration and follow C.Ex. procedure, penalty under Rule 173Q(1) under is imposable.
v) That Mr. Anil Dang, knowingly concerned himself in the illicit clearance of excisable goods and evasion of duty since the said activities would not have been possible without his knowledge or indulgence.
vi) that credit of Medvat claimed by the Appellants for their having not followed the procedure, is not available.
vii) that since the SCN was issued on 16-1-2002 covering the period 1-2-2001 to 31-10-2001 demand is within time as w.e.f. 12-5-2000 the limitation has been increased from six months to one year 1.5 The grounds taken in this appeal are:
Ld Commissioner has erred in passing the impugned order without considering and appreciating the submissions made before him, provisions and settled position of law on the issue, inasmuch as:
(i) that activity of conversion of Jumbo Rolls (500 mm to 700 mm) into Smaller Rolls (250/285/300 mm) by the process of slitting in lesser width, length wise, does not amount to manufacture, based on various judgments and CBEC instructions on the issue.
(ii) That, in any case, the amount of duty paid on the clearance of Jumbo Rolls is more than the duty demanded and such credit has to be allowed based on the judgments on the issue.
(iii) That when demand is leading to duty neutrality, it is not confirmable:
(iv) That, in any case, whatever, duty was being paid at Mahad factory, the same was available as Modvat/Cenvat credit at Silvasa Unit and, hence, there was no intention to evade duty:
(v) That when duty subsequent to paid, on the additional value, by the appellants Mahad factory is not in dispute, credit thereof is admissible, irrespective of whether it was paid voluntarily or otherwise.
(vi) The credit of duty paid on Jumbo Rolls received vide invoice Nos. 253 & 255 both dtd 10.5.2001 is admissible as the inputs covered thereunder where evidenced to have been received by the appellants Silvassa factory.
(vii) That penalty, in the absence of mens rea and that too when the demand is not sustainable on merits, itself, is not imposable.
1.6 The question of slitting of jumbo rolls into smaller rolls as held in the case of paper and steel sheets by the Courts and acceptance of the decisions by the Board will not ipso facto call for holding of the slitting in this case to be not amounting to manufacture following the decision of the Apex Court in the case of Indian Aluminium Cables Ltd. v. Union of India 1935 (21) ELT 3 (SC), wherein the Court has laid down.
13. To sum up the true position, the process of manufacture of a product and the end use to which it is put, cannot necessarily....
The above stipulation was arrived at after concluding in para 13 of the report:
The process of manufacture is bound to undergo transformation with the advancement in science and technology. The name of the end-product may, by reason of new technological processes, change but, the basic nature and quality of the article may still answer the same description....
Therefore, if by slitting the jumbo rolls, rolls of film are obtained which are nothing but 'pouches' or intended to be used to form filled pouches by the consumer, manufacture would take place. The rolls as still would be a now commercially known and understood goods as roll of pouches rather than a jumbo roll of plastic film and duty liability may arrive, following the decision in the case of Laminated Packagings Pvt. Ltd. v CCE 1990 (19) ELT 326 (SC), para 6 which reads as:
The further contention urged on behalf of the appellant that the goods belong to the same entry is also not relevant because even if the goods belong to the same entry, the goods are different identifiable goods, known as such in the market. If that is so, the manufacture occurs and if manufacture takes place, it is dutiable. 'Manufacture' is bringing into bung goods as known in the excise laws, that is to say, known in the market having distinct, separate and identifiable function. On this score, in our opinion, there is sufficient evidence. If that is the position, then the appellant was liable to pay duty, We are, therefore, clearly of the opinion that the order of the CEGAT impugned in this appeal does not contain any error. The appeal, therefore, fails and is accordingly dismissed.
1.7 In this view of the matter, the issue is found to be required to be referred to Larger Bench to determine whether in the facts and circumstances of this case, application of the decision in the case of jumbo rolls of paper and steel sheets and slitting thereof could be applied and the process to be held as non excisable or excisable as per the decisions of the Apex Court as viewed hereinabove. Therefore, the issue is referred to the Larger Bench for resolving the question of 'manufacture' in this case.
1.8 The matter may please be placed before the Hon'ble President for constituting a Larger Bench.
(Pronounced in Court.)