At, Customs Excise Service Tax Appellate Tribunal South Zonal Bench At Bangalore
By, THE HONORABLE JUSTICE: S.S. GARG
By, MEMBER AND THE HONORABLE JUSTICE: B. RAVICHANDRAN
For Petitioner: Kuriyan Thomas, Advocate And For Respondents: Ezhilmathi, Advocate
1. The appeal is against order dated 25-1-2006 of Commissioner (Appeals), Customs, Cochin. The appellants are engaged in production and sale of packaged drinking water. The dispute in the present appeal is relating to duty liability on such product. The appellant contended that the process undertaken by them is not amounting to manufacture and the packaged water is not liable to Central Excise duty. The Revenue on the other hand contended that in terms of Note 2 of Chapter 22 of the Central Excise Tariff, any process undertaken with reference to water to make it marketable to the consumer shall amount to manufacture. Considering the nature of processes undertaken by the appellant, the Revenue held that the resultant product is liable to excise duty and accordingly, proceeded against the appellant, resulted in duty confirmation of Rs. 8,71,048/- with imposition of equal amount of penalty under Section 11AC of the Central Excise Act, 1944. On appeal, the Commissioner (A) while confirming the duty liability, reduced the penalty to Rs. 2 lakhs. The Commissioner (A) dropped penalty of Rs. 2 lakhs imposed on the proprietor of the appellant firm. The learned counsel for the appellant submitted that the product produced and cleared by them is not a result of manufacturing process, as such, they are not liable to Excise duty. Regarding the findings recorded in the impugned order to the effect that excisability of the product was conceded by the appellant, the learned counsel submitted the same is an error. In the appeal before the Commissioner (A), they have categorically contested the excitability of the product. He further submitted that the appellants are simply packing the water with minimum process and there is no manufacture involved in such activity. Regarding penalties imposed on the firm, he submitted that the appellant is a small unit and the penalty of Rs. 2/- lakh is very harsh.
2. Heard the learned AR who supported the impugned order. We note that the provisions of Note 2 to Chapter 22 of the Central Excise Tariff Act are very clear and does not admit any ambiguity. The appellant did undertook significant processes as recorded in the original order. The natural water is treated with chemicals in different stages and finally water is packed in different size of jars from 200 ml to 20 litres affixed with brand name and then are cleared for market. The process undertaken by the appellant to make the product fit for market to the consumers is squarely covered by the said Chapter Note and the process is deemed to be manufacture for the purpose of levy. Regarding the penalty, we note that the original authority imposed penalty under Rule 173Q read with Section 11AC of the Central Excise Act, 1944. The penalty which is equal to the duty amount was reduced by
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the Commissioner (A) to Rs. 2 lakhs, which is almost 25% of the tax levy. Considering, the facts and circumstances of the case and plea of the appellant, we find that a penalty of Rs. 1,00,000/- (Rupees one lakh only) will meet the ends of justice. Except for this modification of penalty, the appeal is rejected.