2009 (5) TMI 640 - AT - Central Excise

Summary

Issues:
1. Duty recovery and penalty imposition based on shortage of finished products and non-maintenance of records.
2. Interpretation of the Central Excise Tariff Act regarding the manufacturing process of drawing wires from wire rods.

Analysis:
1. The case involved the appellants, manufacturers of "Bright Steel Bars of Alloy and Non-alloy steel," who received a show-cause notice for duty recovery due to shortages in finished products and non-maintenance of records. The Deputy Commissioner adjudicated the case, confirming a demand of Rs. 88,296/- and imposing a penalty of Rs. 20,000/- under Rule 173Q of the Central Excise Rules, 1944. The lower appellate authority upheld the demand and penalty, leading to the appeal.

2. The appellants sought to introduce an additional ground related to the interpretation of the Central Excise Tariff Act, specifically Note 10 inserted in Section XV in 2004. They argued that since the disputed period was before the introduction of this Note, their activities did not constitute "manufacture." They also referenced a CBEC Circular and an order by the Additional Commissioner supporting their position that drawing wires from wire rods did not amount to "manufacture."

3. The Appellate Tribunal allowed the appellants to raise the additional ground regarding the manufacturing process carried out by them before the introduction of Note 10 in 2004.

4. The Tribunal noted that the Supreme Court had ruled that drawing wires from wire rods did not amount to "manufacture." However, the Tribunal highlighted that the appellants did not clearly outline their manufacturing process in their submissions to the authorities. The process described by the Additional Commissioner involved converting black coils/bars into bright bars by cleaning, coating, cutting, reeling, and grinding. The Tribunal emphasized the need to examine the appellants' process to determine if the Supreme Court's judgment applied to their case.

5. Consequently, the Tribunal set aside the previous order and remitted the case to the adjudicating authority for a fresh decision. The authority was instructed to consider the appellants' manufacturing process and provide them with a reasonable opportunity to present their defense before issuing new orders in accordance with the law.

6. In conclusion, the appeal was allowed for remand, emphasizing the importance of evaluating the manufacturing process to determine the applicability of the Supreme Court's judgment on whether the appellants' activities constituted "manufacture."