High Court clarifies re-hearing for errors, Tribunal rules on manufacturing activity under Chapter Note 9.

The High Court clarified that both appeals needed to be reheard if there was an error apparent on the face of the record. The Tribunal found that the appellant's activities did not amount to manufacture under Chapter Note 9 to Chapter 38, leading to the setting aside of the demand, interest, and penalties. The assessee's appeal was allowed, while the Revenue's appeal was rejected.

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Issues Involved:
1. Rectification of Mistake in Final Order
2. Classification and Manufacturing Process under Chapter Note 9 to Chapter 38 of the Central Excise Tariff Act, 1985
3. Demand of Differential Duty, Interest, and Penalty

Issue-wise Detailed Analysis:

1. Rectification of Mistake in Final Order:

The appeals were initially rejected by the Final Order dated 19.07.2018. However, upon an application for rectification of mistake, the Final Order was recalled. The appellant contended that only one application for rectification (E/ROM/30090/2019) was filed by them, covering both appeals (E/684/2009 and E/827/2009), and no application was filed by the Department. The Tribunal’s Miscellaneous Order dated 25.03.2019 mentioned an incorrect application number E/ROM/30086/2019, which was actually an early hearing application filed by the assessee. The High Court dismissed the appellant’s appeal, clarifying that both appeals needed to be reheard if there was an error apparent on the face of the record.

2. Classification and Manufacturing Process under Chapter Note 9 to Chapter 38 of the Central Excise Tariff Act, 1985:

The appellant was involved in the manufacturing and trading of chemicals, including Activated Granular Carbon. The dispute arose over whether the activities of packing and labeling/relabeling of Activated Carbon amounted to manufacture under Chapter Note 9 to Chapter 38. The appellant argued that they packed smaller bags (25 kg) into larger bags (50 kg), which does not constitute manufacturing as per the Chapter Note. The Tribunal found that the appellant did not pack from bulk to retail but from retail to bulk, and there was no evidence of sieving or any other process to render the product marketable. Thus, the activities did not amount to manufacture.

3. Demand of Differential Duty, Interest, and Penalty:

The Commissioner confirmed a partial demand of Rs. 35,93,990/- along with interest and an equal amount of penalty, while dropping the remaining demand. The Revenue contended that the entire demand should be confirmed as the Commissioner’s findings were contradictory. The appellant sought the dropping of the entire demand and penalties. The Tribunal found that the appellant’s activities did not amount to manufacture under Chapter Note 9, as there was no evidence of packing from bulk to retail or any other process to render the product marketable. Consequently, the demand, interest, and penalties were set aside.

Conclusion:

The Tribunal concluded that the appellant’s activities did not amount to manufacture under Chapter Note 9 to Chapter 38, and hence, the demand, interest, and penalties were not sustainable. The impugned order was set aside, and the assessee’s appeal was allowed while the Revenue’s appeal was rejected.

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