1995 (5) TMI 113 - AT - Central Excise

Issues Involved:
1. Classification of polyethylene and polypropylene films and sheets.
2. Applicability of exemption notifications.
3. Time-bar on the demand for duty.
4. Allegation of suppression of facts and fraud.
5. Whether splitting lay-flat tubings amounts to manufacture.

Detailed Analysis:

1. Classification of Polyethylene and Polypropylene Films and Sheets:
The primary issue was whether the polyethylene and polypropylene films and sheets manufactured by the respondent fell under Tariff Item (T.I.) 15A(2) and were exempt from duty. The Collector (Appeals) had held that these products were exempt under Notification No. 231/82 and Notification No. 208/84. The department argued that the products were "rigid" plastics based on chemical tests and thus not eligible for exemption. However, the respondent contended that their products were flexible and less than 0.25 mm in thickness, qualifying them for exemption.

2. Applicability of Exemption Notifications:
The respondent claimed exemption under Notification No. 231/82, which provided exemption for polyethylene and polypropylene films and sheets from 23-10-1982 onwards, and Notification No. 208/84, which waived the recovery of duty for such films and sheets cleared between 25-11-1978 and 22-10-1982. The department argued that the products were rigid and thus not covered by these notifications. However, the Tribunal found that the department had not provided sufficient evidence to prove the rigidity of the products as required by the notifications. The Tribunal also noted that the department did not challenge the thickness criterion, which the respondent had consistently claimed was less than 0.25 mm.

3. Time-bar on the Demand for Duty:
The respondent argued that the demands were time-barred. The department issued two show cause notices: one on 6-11-1982 for the period 1-3-1982 to 31-7-1982, and another on 25-1-1983 invoking a larger period for the period 1-4-1977 to 28-2-1982. The Tribunal found that the department did not allege fraud or suppression in the show cause notices, and thus the extended period for demand was not justified. The Tribunal relied on precedents such as Neyveli Lignite Corpn. Ltd. v. Collector of Central Excise and Chloride India Ltd. v. Collector of Central Excise, which held that the invocation of a larger period without allegations of fraud or suppression was unsustainable.

4. Allegation of Suppression of Facts and Fraud:
The department alleged that the respondent had not filed classification lists or obtained licenses for the removal of goods, thus justifying the extended period for demand. However, the Tribunal found that the department had not issued any notice requiring the respondent to obtain a license until the first show cause notice. The Tribunal also noted that the department was aware of the respondent's activities and had not provided evidence of deliberate suppression or fraud. The Tribunal cited the Supreme Court ruling in Cosmic Dye Chemical v. Collector of Central Excise, which required evidence of intent to evade duty for confirming demands for a larger period.

5. Whether Splitting Lay-flat Tubings Amounts to Manufacture:
The respondent argued that the activity of splitting lay-flat tubings did not amount to manufacture, as no new product emerged. The department did not classify the intermediate product (lay-flat tubings) or allege that it was dutiable. The Tribunal agreed with the respondent, noting that the department's case was based on the final products (films and sheets) and not on any intermediate stage. The Tribunal concluded that the department had not substantiated its claim that splitting lay-flat tubings amounted to the manufacture of a new product.

Conclusion:
The Tribunal rejected the revenue's appeal, concluding that the respondent's products were exempt from duty under the relevant notifications, the demands were time-barred, and there was no evidence of suppression or fraud. The Tribunal also held that the activity of splitting lay-flat tubings did not amount to manufacture. Consequently, the appeal of the revenue was dismissed, and the respondent succeeded both on merits and on the issue of time-bar.

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