1989 (7) TMI 257 - AT - Central Excise

Summary

Issues Involved:
1. Whether the conversion of Phenol Formaldehyde (PF) resin into PF moulding powder amounts to "manufacture" under Section 2(f) of the Central Excises & Salt Act, 1944.
2. Classification of PF moulding powder under the Central Excise Tariff (CET).
3. Applicability of Notification No. 83/83 and Notification No. 105/80 for duty exemption.
4. Validity of the penalty and confiscation imposed by the Collector of Central Excise.

Detailed Analysis:

1. Whether the conversion of PF resin into PF moulding powder amounts to "manufacture" under Section 2(f) of the Central Excises & Salt Act, 1944:

The appellants argued that conversion of PF resin into PF moulding powder did not amount to "manufacture" prior to the amendment of Section 2(f) of the Central Excises & Salt Act by the Finance Bill, 1984. They emphasized that the amendment explicitly included the conversion of resins into moulding powders as "manufacture," effective from 1-3-1984. The Tribunal, however, noted that the Tariff Item 15A, as it stood during the material period, covered within its scope moulding powder, and thus, the conversion of resin into moulding powder was taxable under Item 15A(1) by virtue of Explanation III, which included moulding powders. The Tribunal concluded that the conversion process was incidental or ancillary to the completion of the manufactured product, and therefore, the moulding powder was chargeable to duty.

2. Classification of PF moulding powder under the Central Excise Tariff (CET):

The appellants contended that PF moulding powder should be classified under Item No. 68 of the CET, which provided duty exemption for goods with total clearances less than Rs. 30 lakhs. However, the Tribunal held that PF moulding powder was correctly classified under Item 15A(1) due to Explanation III, which explicitly included moulding powders. The Tribunal referenced the Supreme Court's judgment in Dunlop India Ltd. and Madras Rubber Factory Ltd. v. Union of India, which stated that once an article is classified under a distinct entry, the basis of the classification is not open to question. Consequently, the Tribunal affirmed that PF moulding powder was chargeable to duty under Item 15A(1).

3. Applicability of Notification No. 83/83 and Notification No. 105/80 for duty exemption:

The appellants argued that they were eligible for duty exemption under Notification No. 83/83 and Notification No. 105/80, as their total clearances were below the specified threshold. However, the Tribunal found discrepancies between the R.G. 1 register entries and the private ledger entries, indicating that the appellants had cleared goods valued significantly higher than recorded in the statutory records. The Tribunal concluded that the appellants were not eligible for the benefit of Notification No. 83/83 in 1983-84 and were liable to pay duty as determined by the Collector.

4. Validity of the penalty and confiscation imposed by the Collector of Central Excise:

The Collector's order imposed a penalty of Rs. 6,00,000/- on the appellants and confiscated certain seized goods, allowing them to be redeemed on payment of a fine of Rs. 6,500/- plus the appropriate amount of duty. The appellants did not address any arguments regarding the penalty and confiscation during the appeal hearing. Consequently, the Tribunal did not record any findings on these aspects and upheld the Collector's order.

Conclusion:

The appeal was dismissed, affirming the Collector's order that PF moulding powder was chargeable to duty under Item 15A(1) of the CET and upholding the penalty and confiscation imposed. The Tribunal emphasized that the conversion of PF resin into moulding powder constituted "manufacture" and that the goods were correctly classified under Item 15A(1), making them liable for excise duty.