2002 (9) TMI 628 - AT - Central Excise

Tribunal rules repacking yarn not manufacturing, drops duty demand & penalty

MALWA COTTON SPG. MILLS LTD. Versus COMMISSIONER OF C. EX., CHANDIGARH

The Tribunal upheld the penalty imposed under rule 173Q for procedural lapses by the appellant but disagreed on the manufacturing aspect of repacking ... Manufacture - Penalty Issues:1. Imposition of penalty under rule 173Q2. Sustaining demand of dutyImposition of Penalty under Rule 173Q:The Commissioner (Appeals) upheld the penalty imposed under rule 173Q for procedural lapses and contravention of Central Excise Rules by the appellant. The assessee filed an appeal against this penalty. The Tribunal noted that the process of repacking undertaken by the assessee did not amount to manufacture as per the relevant Chapter Notes. The Tribunal held that the process of repacking yarn does not fall under the processes specified in the Chapter Notes, which pertain to the yarn itself and not repacking. Therefore, the Tribunal did not interfere with the Commissioner's findings regarding the penalty imposed under rule 173Q.Sustaining Demand of Duty:The issue of sustaining the demand of duty arose from the Department's allegation that the process of repacking/reprocessing excisable yarn constituted a process of manufacture, requiring the assessee to pay duty at the time of clearances. The Department issued a show cause notice demanding duty and imposing penalties. The assessee argued that the process of repacking did not amount to manufacture based on the Chapter Notes provided. The Tribunal considered whether the process of repacking constituted a process of manufacture. It was observed that the Chapter Notes specified processes related to the yarn itself, not repacking. The Tribunal agreed with the Commissioner (Appeals) that the process of repacking did not amount to manufacture. As the extended period for demand was not invocable, the penalty could not be imposed, following the precedent set by the Apex Court. Consequently, the Tribunal upheld the dropping of the demand of duty and set aside the imposition of penalty.This judgment highlights the importance of interpreting statutory provisions and relevant case law to determine the liability for duty payment and penalties in excise matters. The Tribunal's analysis focused on the specific processes outlined in the Chapter Notes to establish whether the activity of repacking constituted a process of manufacture. The decision underscores the need for a clear understanding of legal provisions and factual circumstances to adjudicate excise duty disputes effectively.