2002 (7) TMI 666 - AT - Central Excise

Tribunal overturns penalties for duty demand, citing lack of extended penalty period. Appeal allowed.

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

The Tribunal upheld the dropping of the duty demand and set aside the penalties imposed under Rule 173Q and Section 11AC. It ruled that the penalty under ... Manufacture - Penalty Issues Involved:1. Imposition of penalty under Rule 173Q2. Sustaining demand of duty3. Interpretation of Chapter Notes for manufacturing processAnalysis:1. Imposition of Penalty under Rule 173Q:The appellant filed an appeal against the imposition of penalty under Rule 173Q for procedural lapses and contravention of Central Excise Rules. The Commissioner (Appeals) upheld the penalty under Rule 173Q but vacated the penalty imposed under Section 11AC. The appellant contended that the penalty was beyond six months and, therefore, could not be imposed. The learned Counsel argued that since the penalty was not sustainable, the appeal should be allowed. The Tribunal noted that the extended period for penalty invocation was not applicable as per the findings of the Commissioner (Appeals). As the Revenue did not challenge this aspect, the penalty under Rule 173Q was set aside based on legal precedents.2. Sustaining Demand of Duty:The dispute arose when the Department alleged that the process of repacking/reprocessing excisable yarn amounted to a manufacturing process, requiring duty payment at the time of clearance. The appellant argued that repacking did not constitute a manufacturing process as per the Chapter Notes related to specific processes like dyeing, printing, etc. The Additional Commissioner confirmed the duty demand and imposed penalties under Section 11AC and Rule 173Q. However, the Tribunal held that repacking did not amount to manufacturing based on the Chapter Notes, which did not include repacking as a manufacturing process. Consequently, the demand of duty was dropped in favor of the appellant.3. Interpretation of Chapter Notes for Manufacturing Process:The Tribunal focused on interpreting the Chapter Notes related to specific processes mentioned for different types of products. It was observed that the processes listed in the Notes were specific to the products themselves and did not encompass repacking as a manufacturing process. The Tribunal concluded that repacking of yarn did not fall under the definition of manufacturing as per the Chapter Notes. This interpretation played a crucial role in determining the liability of duty payment and the imposition of penalties in the case.In conclusion, the Tribunal disposed of the appeals by upholding the dropping of the demand of duty and setting aside the imposition of penalties, emphasizing the interpretation of Chapter Notes and the applicability of legal principles regarding penalty imposition.