2002 (2) TMI 176 - AT - Central Excise

Tribunal Grants Appeals for Remand on Assessable Value, Duty, and Penalty

The Tribunal allowed the appeals for remand, directing a re-determination of assessable value and quantification of duty, consideration of Modvat credit ... Exigibility of excise duty on manufacture - manufacture as emergence of a different commercial commodity - assessable value to be computed on cum-duty price - Modvat/credit eligibility - penalty and confiscation - reconsideration after re-quantificationExigibility of excise duty on manufacture - manufacture as emergence of a different commercial commodity - The processed material received and operated upon by the appellant results in goods that are 'Sewing Thread' and are exigible to Central Excise duty. - HELD THAT: - The proprietor's statement under Section 14 and the admitted nature of processing (dyeing, steaming, caustic wash, silicone oil finish, drying, rewinding, waxing and winding into marketed lengths) establish that the operations on the received yarn produce an identifiable commercial commodity known in the market as 'Sewing Thread'. The Tribunal applied the test that manufacture occurs where goods, by virtue of operations performed, emerge as different identifiable goods with distinct commercial function. Reliance was placed on Laminated Packaging (1990 (49) E.L.T. 326 (S.C.)) to hold that prior payment of duty on raw material is irrelevant to exigibility where manufacture brings into being market-recognised goods. Accordingly the goods cleared from the appellant's premises are dutiable as Sewing Thread under the relevant tariff heading. [Paras 3]Goods cleared are exigible as 'Sewing Thread' and duty is payable.Assessable value to be computed on cum-duty price - The matter of assessable value is remanded for de novo determination on the basis that price realised should be treated as inclusive of duty (cum-duty) and re-quantification is required in accordance with the Larger Bench decision in Sri Chakra Tyres. - HELD THAT: - The Tribunal found force in the submission that the price realised is a cum-duty price and therefore the excise duty must be calculated treating the realised price as inclusive of duty rather than adding duty over and above the realised price. Being bound by the Larger Bench authority in Sri Chakra Tyres (1999 (108) E.L.T. 361 (T-L.B.)), the Tribunal set aside the quantification and remanded the case to the adjudicator for redetermination of assessable value and duty liability in conformity with that precedent. [Paras 3]Assessable value and duty quantification remanded for fresh determination treating the price as cum-duty.Modvat/credit eligibility - The question of Modvat (input credit) eligibility is remanded for determination in the de novo proceedings. - HELD THAT: - Because the Tribunal remanded the matter for re-quantification of duty and reassessment of assessable value, it directed that the adjudicator also consider eligibility for Modvat credit in light of the determinations to be made on quantification and classification, and in accordance with the observations in Laminated Packaging regarding credit where duty has been paid on inputs. [Paras 3]Modvat credit claim remanded for consideration in the de novo proceedings.Penalty and confiscation - reconsideration after re-quantification - The penalties and orders of confiscation are set aside and remitted for reconsideration by the adjudicator after re-determination of duty and related issues. - HELD THAT: - Since the Tribunal remanded the core issues of exigibility, assessable value and Modvat entitlement for fresh adjudication, it held that the penalty imposed and the orders of confiscation cannot stand without regard to the newly to be determined duty liability. The Tribunal therefore set aside the penalty and directed that penalty and confiscation (including redemption on fine) be re-considered in the light of the duty amounts determined in the de novo proceedings. [Paras 2, 3]Penalty and confiscation orders set aside and remanded for reconsideration consequent to re-quantification of duty.Final Conclusion: The appeals are allowed to the extent that the Tribunal upholds exigibility of duty on goods as 'Sewing Thread' but sets aside the quantification, Modvat and penalty/confiscation orders and remands the matters for de novo determination of assessable value (treating price as cum-duty), Modvat entitlement and reconsideration of penalty/confiscation in accordance with those determinations. Issues:1. Central Excise Duty evasion by manufacturing and removing 'Cotton Sewing Thread' and 'Polyester Sewing Thread' without registration and payment of duty.2. Imposition of penalty, confiscation of goods, and machinery under Rule 209A.3. Confiscation and release of Polyester Sewing Thread under seizure.4. Admissibility of Modvat credit claim.5. Re-determination of assessable value and quantification of duty.6. Consideration of duty as cum duty price.7. Remand for de novo quantification of duty demands and penalty reconsideration.Detailed Analysis:1. The appellants were issued a show cause notice for evading Central Excise Duty by manufacturing and removing 'Cotton Sewing Thread' and 'Polyester Sewing Thread' without registration and payment of duty. The Commissioner concluded that the appellants were liable to pay the entire Central Excise Duty demanded under Section 11A(i) of the Central Excise Act, 1944. Penalty and confiscation of goods and machinery were also imposed under Rule 209A.2. The Commissioner confiscated Polyester Sewing Thread under seizure and ordered its release on payment of a fine after approximating the duty. Additionally, a penalty of Rs. 10 lakhs was imposed on the appellants, and plant & machinery were ordered to be confiscated under Rule 173Q, redeemable on payment of a fine.3. The Tribunal considered the submissions of the appellant and the Revenue. The appellant's manufacturing process involved dyeing, rewinding, and other activities resulting in the production of 'Sewing Thread.' The Tribunal found that the goods manufactured by the appellants qualified as 'Sewing Thread' under the Tariff, and duty should be levied accordingly. The Tribunal relied on the decision in the case of Laminated Packaging to support its conclusion.4. The Tribunal ordered a re-determination of the assessable value and quantification of duty based on previous decisions and directed the Adjudicator to consider the Modvat credit claim. The Tribunal emphasized the importance of considering the price realized as cum duty price for calculating Excise Duty.5. Considering the decisions in relevant cases, the Tribunal set aside the penalty and ordered a re-evaluation of the penalty amount based on the revised duty demands. The Tribunal remanded the matter for de novo quantification of duty demands and reconsideration of the penalty in light of the revised duty amounts.6. In conclusion, the Tribunal allowed the appeals for remand in the specified terms, emphasizing the need for re-evaluation of duty demands, consideration of Modvat credit claim, and reassessment of penalty amounts based on the revised duty calculations.