2010 (4) TMI 519 - AT - Central Excise

Tribunal rules no duty liability for fabric treatment; assessee's appeal allowed

The Tribunal held that the activity of padding applying starch and inorganic mineral matters did not amount to manufacture, leading to the dismissal of ... Manufacture - the Commissioner (Appeals) dropping the proceedings against the assessee holding that the activity of padding applying starch, inorganic mineral matters does not amount to manufacture and there is no duty liability. Appeal filed by revenue. Held that - as no new product with distinct name, character and use came into existence, process of padding did not amount to manufacture. Issues:1. Whether the activity of padding applying starch, inorganic mineral matters amounts to manufacture and attracts duty liability.2. Whether the assessee is eligible for exemption under Notification No. 3/2001-C.E. for the seized goods.Issue 1:The case involved an appeal by the Revenue against the dropping of proceedings by the Commissioner (Appeals) regarding the activity of padding applying starch and inorganic mineral matters. The Revenue contended that the process carried out did not fall under the category of padding as defined in the notification, thus attracting duty liability. The Commissioner (Appeals) had held that the activity of padding did not amount to manufacture based on chemical test reports. The Tribunal agreed with this finding, citing precedents where similar processes were deemed not to be manufacturing activities. The Tribunal emphasized that the fabrics did not undergo a change in character that would constitute manufacture, leading to the dropping of duty liability, redemption fine, interest, and penalty on the assessee.Issue 2:Regarding the eligibility for exemption under Notification No. 3/2001-C.E. for the seized goods, the Revenue argued that the assessee was not entitled to the exemption due to the use of inorganic chemicals in the padding process. The Revenue emphasized that the process did not align with the definition of padding in the notification. However, the Tribunal upheld the Commissioner (Appeals)'s decision that the activity of padding undertaken by the assessee did not amount to manufacture. The Tribunal relied on precedents where similar processes involving starch and special processes were not considered manufacturing activities. As a result, the Tribunal rejected the Revenue's appeal and allowed the assessee's appeal, dropping the duty, redemption fine, interest, and penalty imposed on the assessee.In conclusion, the Tribunal upheld the decision that the activity of padding applying starch and inorganic mineral matters did not amount to manufacture, leading to the dismissal of the Revenue's appeal and the allowance of the assessee's appeal.