2003 (3) TMI 618 - AT - Central Excise

Summary

Issues:
- Appeal against Order-in-Appeal passed by the Commissioner (Appeals) regarding central excise duty on galvanised mild steel (MS) pipes cleared for Domestic Tariff Area (DTA).
- Whether the process of galvanising amounts to manufacture under Section 2(f) of the Central Excise Act.
- Interpretation of notification No. 1/95-C.E. regarding exemption from duty for 100% EOUs engaged in galvanising of MS black pipes.
- Applicability of duty on galvanised pipes cleared for DTA when originally intended for export.

Analysis:
The appellants, 100% EOUs, brought mild steel pipes and zinc without payment of duty for exporting galvanised MS pipes. However, they cleared galvanised pipes for DTA without duty payment, leading to a demand notice for duty and penalty imposition. The contention was whether galvanising amounts to manufacture under the Central Excise Act.

The notification No. 1/95-C.E. exempts excisable goods brought by EOUs for export-related manufacturing from duty payment. Circulars clarified that galvanising by 100% EOUs falls under the definition of 'manufacture'. Despite the appellants' argument that galvanising isn't manufacturing, the Tribunal precedent and Supreme Court decision established that galvanising charges are part of the assessable value for excise duty.

In this case, the appellants received duty-free ungalvanised pipes for export but cleared galvanised pipes for DTA without paying duty. This action was deemed inconsistent with the EOU scheme and notification terms. The Tribunal upheld the duty demand but reduced the penalty considering the circumstances. The judgment highlighted that duty should be paid on the value of galvanised pipes cleared for DTA instead of export, aligning with the scheme's intent.