2026-VIL-1555-CESTAT-DEL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Process of lamination of fabrics with plastic material as manufacture, Test of transformation into new and different article - The Appellant was engaged in lamination of cotton, jute and man-made fabrics with plastic materials (LDPE, PP and HDPE). During investigation, laminated fabrics seized and sent to CRCL for testing. The report confirmed goods were woven fabrics laminated with polypropylene. The Appellant contended lamination does not amount to manufacture relying on Shree Jee Laminators decision. The Revenue submitted that lamination amounts to manufacture as held by the Supreme Court in Laminated Packings (P) Ltd. - Whether the process of laminating a fabric with plastic material amounts to manufacture - HELD - The principle for determining manufacture has been laid down by the Supreme Court in Union of India versus Delhi Cloth and General Mills Co. Ltd., which provides that manufacture implies transformation into a new and different article having a distinct name, character or use. A fabric and a plastic-laminated fabric are different articles known by different names with different uses - In Laminated Packings, the Supreme Court held that lamination of Kraft paper with polyethylene amounts to manufacture. The decision in Shree Jee Laminators, which held that lamination does not amount to manufacture, was decided without discussing or distinguishing Laminated Packings. The Supreme Court judgment must be followed - The process of laminating a fabric with plastic amounts to manufacture. The finding that lamination amounts to manufacture is upheld and the demand of duty is upheld - Exemption under job work notifications for goods manufactured on behalf of principals, Applicability of Notification No. 214/86-CE and Notification No. 83/94-CE, Requirement of undertaking from principal manufacturer, Effect of additional materials - The Appellant carried out lamination work on fabrics supplied by principal manufacturers and also purchased additional materials and claimed exemption under job work notifications provided the principal gives an undertaking to use goods for manufacturing final excisable products. The Commissioner denied the benefit contending that since only part of inputs were supplied by the principal and rest were purchased by the appellant, the work was not pure job work - Whether the appellant is entitled to exemption where the principal has given an undertaking and whether use of additional materials by job worker disentitles the work from being classified as job work - HELD - The exemption notifications require the principal to give an undertaking to use goods for manufacturing excisable products on which duty will be paid. The undertaking is not a formality but the very basis for the exemption. When a job worker works on material supplied by principal, some additional materials by job worker are likely to get used but that does not vitiate the character of arrangement as job work. The essence of job work exemption is the principal's undertaking to discharge duty on final products. Use of additional materials does not vitiate job work character. The appellant is therefore entitled to the benefit of exemption notifications to the extent requisite undertakings were produced by principals - The exemption from duty on goods manufactured on job work is allowed only to the extent requisite undertakings were provided by the principal. For goods where no undertaking was obtained, duty is liable to be paid - Exemption for small scale industries under Notification No. 8/2000-CE and subsequent notifications, Coverage of laminated HDPE fabrics, Proper interpretation of exclusion for strips of plastics under Chapter 39 - Whether the exemption for small scale industries is available for laminated HDPE fabrics or whether such goods are excluded as falling within Chapter 39 - HELD - The SSI exemption notifications cover all excisable goods except those specifically excluded in the Schedule. What is excluded is strips of plastics falling under Chapter 39 which are raw materials intended for weaving. Laminated HDPE fabrics are finished goods, not strips of plastics intended for weaving. The exclusion clause specifically refers to raw material strips, not to finished laminated fabrics. Therefore the Commissioner erred in holding that laminated HDPE fabrics were not covered by the exemption. The distinction between raw materials (strips for weaving) and finished products (laminated fabrics) is material to the application of the exemption - The appellant is entitled to the benefit of the SSI exemption notifications during the relevant years - Valuation of excisable goods manufactured on job work basis under Rule 10A of Central Excise (Determination of Price of Excisable Goods) Rules 2000, Whether notional profit can be added to cost of raw material and job charges - The Appellant contended that a notional profit was wrongly added in reckoning the value of goods cleared on job work basis. The Commissioner included notional profit to the cost of raw material and job charges in determining value - Whether notional profit can be added in determining the value of excisable goods manufactured on job work basis - HELD - Rule 10A of the Central Excise (Determination of Price of Excisable Goods) Rules 2000 prescribes the method for valuation of excisable goods produced by a job worker. Where goods are sold by the principal manufacturer, the value shall be the transaction value or normal transaction value of such goods sold. Where goods are not sold at the time of removal from the factory, the value shall be determined as per the foregoing rules. The Rule does not provide any provision for adding notional profit. The value must be determined strictly in accordance with Rule 10A and any addition of notional profit is contrary to the statutory valuation mechanism - The value of goods cleared on job work shall be determined strictly as per Rule 10A of the Valuation Rules 2000 without addition of any notional profit - Invocation of extended period of limitation, Circumstances justifying recourse to extended period - Whether the extended period of limitation was properly invoked where the assessee was aware of the requirement to obtain undertaking from principals but failed to do so for most of the goods - HELD - The appellant was aware that it was clearing goods manufactured on job work and that the exemption notifications required an undertaking from each principal. Despite this awareness, it obtained such undertaking from only one principal for 40% of goods. The assessee had no reason to not obtain undertakings from other principals when it was aware about the requirements of the notification. Without the undertaking, the appellant was required to pay central excise duty. The assessee's failure to comply with the statutory requirement despite being aware of it provides sufficient grounds to invoke the extended period of limitation in issuing the demand notice - The invocation of extended period of limitation is upheld and the demand covered by the extended period is justified - Penalty under Rule 209A of Central Excise Rules 1944 and Rule 26 of Central Excise Rules 2002, Imposition of penalty on employee of assessee - Whether penalty under Rule 209A and Rule 26 can be imposed on an employee where there is no order of confiscation - HELD - Both Rule 209A of the Central Excise Rules 1944 and Rule 26 of the Central Excise Rules 2002 provide for penalty for acts or omissions which render goods liable to confiscation under the Act. In the impugned order, there is no order of confiscation. Without confiscation of goods, the condition precedent for imposing penalty under these two Rules is not satisfied. Therefore penalty under these rules cannot be sustained - The penalty under Rule 209A of the Central Excise Rules 1944 read with Rule 26 of the Central Excise Rules 2002 is set aside.
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