2005 (7) TMI 530 - AT - Central Excise

Summary

Issues Involved:
1. Liability to pay excise duty on 'Molecular Sieve Battery' (MSB).
2. Classification of MSB under Central Excise Tariff Heading 8421.00.
3. Determination of whether the activities performed by the appellants constitute 'manufacture' under Section 2(f) of the Central Excise Act, 1944.
4. Consideration of MSB as immovable property.
5. Condonation of delay in filing the appeal.

Detailed Analysis:

1. Liability to Pay Excise Duty on 'Molecular Sieve Battery' (MSB):
The core issue in both appeals revolves around whether the appellants are liable to pay excise duty on MSB. The department contends that the activities performed on MSB constitute 'manufacture,' thereby attracting excise duty. The appellants argue that MSB is an immovable property and not subject to excise duty.

2. Classification of MSB under Central Excise Tariff Heading 8421.00:
The adjudicating authority classified MSB under Tariff Heading 8421.00, which covers goods identifiable as new products warranting the levy of Central Excise duty. The authority relied on the Supreme Court judgment in Sirpur Paper Mills, which held that assembly of machinery from bought-out items amounts to manufacture if the assembled machine can be sold in the market.

3. Determination of 'Manufacture' under Section 2(f) of the Central Excise Act, 1944:
The appellants' activities included receiving MSB components, cleaning, painting, testing, and reassembling before dispatching to customers. The authority concluded that these activities result in a new identifiable product, thus constituting 'manufacture' as defined under Section 2(f) of the Central Excise Act, 1944. However, the Tribunal found that the activities performed by the appellants did not result in a new product and thus did not constitute manufacture under the Central Excise Law.

4. Consideration of MSB as Immovable Property:
The appellants argued that MSB, once installed at the customer's site, becomes immovable property as it is permanently embedded in the earth. The Tribunal noted that the lower authority did not adequately consider this argument. The Tribunal emphasized that MSB, in its form and manner as dispatched by the appellants, does not constitute a new product and is considered immovable property, thus not subject to excise duty.

5. Condonation of Delay in Filing the Appeal:
In Appeal No. E/882/01, the Commissioner (Appeals) condoned the delay in filing the appeal but upheld the duty demands on similar grounds. The Tribunal found no valid reasons provided by the Commissioner for not considering the condonation of delay. Consequently, the Tribunal allowed the appeal on the same grounds as the primary issue of excise duty on MSB.

Conclusion:
The Tribunal concluded that the activities performed by the appellants on MSB do not constitute manufacture under the Central Excise Law. Therefore, the levy of duty on MSB under Tariff Heading 8421.00 is not upheld. Both appeals are allowed, and the orders of the lower authority are set aside. The Tribunal also addressed the issue of condonation of delay, finding in favor of the appellants.

Pronouncement:
In view of the findings, the orders are set aside, and the appeals are allowed.