S.S. Sekhon, Member (T) - (1.)APPELLANT in appeal E/1461 is a company, (here in after referred to a HCGL for short) they are engaged in the Purchase & Sale of exciseable goods. They entered into an agreement with their C & F against M/s Musale Enterprise (herein after referred to a ME for short) to receive different chemicals from various parties as ordered by HCGL. The goods were tested thereafter, ME, as per direction of HCGL relabelled the containers by removing the original labels and affixing labels indicating HCGL suggested names as intimated to them. The relabelled goods were thereafter sent on challans to different parties as per direction of HCGL.
(2.)The officers visited the godowns of ME and seized certain goods. This activity of relabelling was considered to be 'manufacture' in view of chapter notes 6 & 5 respectively of chapter 34 x 38 of the schedule to the Central Excise Tribunal Act 1985 & this actual was considered to be conducted in violation of the Central Excise Law. Duty demands were made, confined for the perusal 1/3/94 to 17/7/97. The goods under seizure valued at Rs. 2,64,200/- were confiscated under Rule 173Q(1) & ordered to be redeemed on payment of fine of Rs. 25000/- penalties of Rs. 47,75,999. under Section 11 AC was imposed on HCGL Rs 1 Lakhs on ME, Rs 50 thousand on Shri A.R. Musale godown incharge of ME, Rs 4 Lakhs on Shri D. Krishnamurthy GM of HCGL under Rule 201A along with interest. Hence these appeals.
After hearing both sides and considering the issues it is found

a) The Ld Advocate does not press the appeal for the liability of duty after 1.3.97. No findings on such liability therefore arrived.

b. As regards the liability of duty during the period prior to 1.3.97 the findings of the Tribunal in the case of Nilgiri Herbals Pvt. Ltd (2003 (152) ELT 436 would induce us to hold that no manufacturing took place, as per the chapter notes, when Only labels were replaced since nothing contrary shown to us Demands of duty therefore for period prior to 1.3.97 & penalty thereon cannot be upheld.

c. As regards penalty under Section 11 AC for the period subsequent to 1.3.97, the same has been imposed HCGL. Penalty under Section 11 AC on HCGL by determining them to be the person liable to duty cannot be upheld since the alleged manufacture took place at the godown of ME. The question of who is the manufacturer has to be redetermined & who would be the assessee & liable to pay duty or from whom the same could be recovered under Rule 7 of the Central Excise Rules (sic) is to be re-determined in light of decision of the apex court in the case of Ujager Prints 1988 (38) ELT 535 SC MM Khamb(sic) 1996(84) ELT 161 SC & Pawan Biscuits 2000(120) ELT 248 SC i.e HCGL or ME. For this purpose a remand Order is required to be made. After the determination of the person liable to pay the duty determined, the role appreciated and penalty & quantum thereof under Section 11 AC fixed on such person.

d. The penalty on ME under Rule 209 A would be required to be set aside & re-determined if they are held to be the person liable to pay the duty then whether they can be liable under Rule 209 A has to be determined. The order is set aside as regards ME & remitted.

e. Since the matter is being sent back for denovo adjudication & the substantial portion of demand is not being upheld the appeals of Shri Musale & Shri D. Krishnamurthy against the penalties imposed, is also to be allowed as remand & re-determined after rehearing them.

f. Consequently the appeals are disposed off in above terms.

(Pronounced in Court)