1995 (4) TMI 142 - AT - Central Excise

Interpreting manufacturing processes: Appellate Tribunal exempts plastic body from Central Excise duty

SONIC ELECTROCHEM (P) LTD. Versus COLLECTOR OF CENTRAL EXCISE, INDORE

SONIC ELECTROCHEM (P) LTD. Versus COLLECTOR OF CENTRAL EXCISE, INDORE - 1995 (78) E.L.T. 146 (Tribunal) Issues:1. Liability of Central Excise duty on plastic body and Fragrance Mat.2. Applicability of Notification No. 175/86 for exemption.3. Allegations of duty evasion on Fragrant Mats.4. Interpretation of the manufacturing process and classification of goods.5. Benefit of small scale exemption under Notification No. 175/86.6. Failure to obtain a Central Excise License and payment of duty.7. Legal defenses raised by the appellants.8. Previous judgment by the Hon'ble Madhya Pradesh High Court.9. Appeal filed by the Revenue before the Hon'ble Supreme Court.Analysis:1. The case involved the liability of Central Excise duty on the plastic body and Fragrance Mat manufactured by the appellants during specific periods. The Learned Collector held that the plastic body and Fragrance Mat were subject to duty, directing a redetermination of duty liability and imposing a penalty under Rule 173Q of Central Excise Rules, 1944. The Collector also rejected the appellants' claim for exemption under Notification No. 175/86.2. The appellants contended that the plastic body, an essential part of Electro Mosquito Repeller, should not be considered as goods subject to duty, as it was an intermediary product in the manufacturing process. They argued that the plastic body was not identifiable and marketable as a separate product. Additionally, they claimed that the brand name 'JET' was associated with the Electro Mosquito Repeller, not the plastic body.3. The appellants relied on a previous judgment by the Hon'ble Madhya Pradesh High Court, which quashed a show cause notice demanding excise duty on similar grounds. The High Court ruled that the plastic bodies were not liable for excise duty and that the appellants were entitled to the benefits of Notification No. 175/86, exempting them from licensing control under Rule 174A of Central Excise Rules.4. The Revenue had filed an appeal before the Hon'ble Supreme Court, which was admitted without a stay. However, considering the judgment of the Madhya Pradesh High Court and the quashing of proceedings, the Appellate Tribunal allowed the appeal in favor of the appellants, following the High Court's decision.5. The legal battle revolved around the interpretation of the manufacturing process, classification of goods, applicability of exemptions, and the previous judicial pronouncements, ultimately resulting in the appellants' success based on the High Court's ruling.