2001 (5) TMI 729 - AT - Central Excise

Summary

Issues:
1. Whether the process undertaken by the appellants amounts to manufacture for the purpose of Central Excise duty.
2. Valuation of the final product for assessment of duty.

Issue 1:
The appellants manufactured chemically bonded chrome manganese bricks from broken and pulverized refractory bricks supplied free of cost by M/s. IISCO. The dispute arose when the Superintendent of Central Excise alleged that duty had not been paid correctly as the value for duty calculation did not include the cost of raw materials. The Assistant Commissioner confirmed the demand for differential duty and imposed a penalty. The Commissioner (Appeals) rejected the appeal, leading to the current appeal. The appellants argued that their process did not amount to manufacture as they were essentially recycling old bricks. They cited previous decisions to support their claim. However, the tribunal disagreed, noting that the process involved significant changes resulting in a new product with a different name, character, and use. The tribunal emphasized that the appellants had paid duty on the final product and had not contested the manufacturing aspect earlier. Therefore, the tribunal rejected the contention that no manufacturing process was involved.

Issue 2:
The second issue revolved around the valuation of the bricks for duty assessment. The appellants received broken bricks free of cost from M/s. IISCO, but the department argued that the cost of similar material purchased from another source should be included in the valuation. The tribunal observed that the appellants had paid duty without considering the cost of the raw materials provided free of cost. The Assistant Commissioner included the cost of broken bricks based on a transaction with another supplier without specifying the valuation rule applied. The tribunal determined that the valuation should comply with the Valuation Rules and called for a fresh assessment by the original authority. Consequently, the tribunal allowed the appeal by remanding the matter for reevaluation under the correct provisions of law.

In conclusion, the appellate tribunal ruled that the process undertaken by the appellants constituted manufacture, rejecting their argument of recycling old bricks. Additionally, the tribunal directed a reassessment of the valuation of the final product for duty calculation in accordance with the Valuation Rules.