Coiling of wire is not manufacture of excisable goods, and penalty falls when the duty demand itself fails.

Conversion of double paper covered wire into coils did not create a new marketable commodity, so the winding process did not amount to manufacture of excisable goods and no fresh excise duty was payable on the coils. The Tribunal noted that a coil is not a separate commodity in excise law, although any duty adjustment linked to Modvat credit on the original wire could still survive if applicable. As the underlying duty demand failed, there was no basis for imposing penalty, and the penalty was set aside.

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Issues: (i) Whether conversion of Double Paper Covered wire into coils amounted to manufacture of a new marketable excisable product and attracted duty. (ii) Whether penalty was imposable on the respondents.

Issue (i): Whether conversion of Double Paper Covered wire into coils amounted to manufacture of a new marketable excisable product and attracted duty.

Analysis: The Tribunal held that a coil, as such, is not a commodity by itself or goods within the meaning of the excise law. Conversion of DPC wire into coils did not bring into existence a new marketable product, and excise duty could not be levied again on the same material merely because it was used in repairing old transformers. The Tribunal also noted that if Modvat credit had been availed on the DPC wire, duty liability would be confined to the extent of such credit.

Conclusion: The conversion of DPC wire into coils did not amount to manufacture of excisable goods, and no duty was payable on the coils as such; only the Modvat-linked liability, if any, could survive.

Issue (ii): Whether penalty was imposable on the respondents.

Analysis: In view of the finding that the coils were not excisable goods and the nature of the dispute was not one warranting penal action, the Tribunal found no basis for imposing a penalty equal to the duty demand.

Conclusion: No penalty was imposable.

Final Conclusion: The demand on coils was not sustainable as such, the penalty was set aside, and only any duty adjustment linked to Modvat credit, if applicable, could remain enforceable.

Ratio Decidendi: A fabricated coil that is not marketable as an independent commodity does not amount to excisable goods or manufacture merely because wire is wound into coils, and penalty cannot be imposed where the underlying duty demand fails.

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