2019 (1) TMI 1858 - AT - Service Tax

Scope of coverage under Central Excise Act 1944 - processor undertaking printing and stentering of terry towel fabric without aid of power - Applicability of Note 7 in Chapter 58 of the First Schedule to Central Excise Tariff Act 1985 - HELD THAT - The appellant if undertaking the two processes without aid of power would not be liable to duties of excise as a manufacturer. It is not in dispute that the appellant works on running the length of fabric which is printed and stenterized. It would appear from the findings that the allegation of use of power has been upheld solely because light is used for inspection of the printed fabric. That is not the intent of the said note in chapter which must be inextricably connected with the process. It has been held in re Swastik Dyeing Bleaching Factory 2003 (12) TMI 206 - CESTAT MUMBAI that insofar as cotton fabric is concerned stentering involves mere drying; there is no evidence that any power source is utilised for such drying. Appeal allowed - demand as well as penalty set aside - appeal allowed by way of remand.

Issues:
1. Confirmation of demand under Rule 9(2) of Central Excise Rules, 1944 read with Section 11A of Central Excise Act, 1944.
2. Imposition of penalty under Rule 173Q of Central Excise Rules, 1944.
3. Interpretation of the note in Chapter 58 of the First Schedule to Central Excise Tariff Act, 1985 regarding manufacturing processes.
4. Compliance with procedural requirements under Rule 96D of Central Excise Rules, 1944.
5. Non-compliance with the Tribunal's direction to adjudicate the dispute in conjunction with another party's case.
6. Allegations of exporting goods without payment of duty.
7. Interpretation of the manufacturing process involving the use of power.

Confirmation of Demand and Penalty:
The appeal involved a demand confirmation of &8377; 3,36,838 under Rule 9(2) of Central Excise Rules, 1944 along with a penalty of &8377; 75,000 under Rule 173Q. The dispute arose from the appellant's claim to be outside the scope of the Central Excise Act, 1944 as a processor. The adjudicating authority confirmed the demand and imposed the penalty, which was challenged multiple times before the Tribunal.

Interpretation of Manufacturing Processes:
The Tribunal analyzed the note in Chapter 58 of the Central Excise Tariff Act, 1985, which states that certain processes amount to manufacture. The adjudicating authority relied on precedents to assert that the appellant's processes fell within the ambit of manufacturing, especially due to the use of power for printing and stentering. However, the Tribunal disagreed, emphasizing that the use of light for inspection did not constitute the use of power as intended by the note. It was established that stentering, concerning cotton fabric, only involved drying without the use of a power source.

Compliance and Non-Compliance:
The Tribunal noted the appellant's non-compliance with procedural requirements under Rule 96D of Central Excise Rules, 1944. Additionally, the appellant raised concerns about the non-compliance with the Tribunal's directive to adjudicate the dispute jointly with another party's case, which was not addressed during the subsequent proceedings.

Allegations of Exporting Goods:
The appellant faced allegations of either exporting goods or clandestinely removing them without duty payment. The Tribunal considered relevant precedents to assess the implications of these allegations on the case.

Conclusion:
Ultimately, the Tribunal found that the impugned order erred in concluding that the appellant had used power for the processes, thereby setting aside the demand and penalty, allowing the appeal in favor of the appellant. The judgment highlighted the importance of accurately interpreting manufacturing processes and complying with procedural requirements in excise matters.

← Previous Next →