2006 (7) TMI 366 - AT - Central Excise

Issues:
1. Whether the activities of decoiling, straightening, cutting, bending, and bundling of Bars and Rods amount to manufacture and are chargeable to duty.
2. Whether the appellant company is liable to discharge Central Excise Duty for the said activities.
3. Applicability of Board's Circular No. 811/08/2005-CX dated 2-3-2005.
4. Interpretation of the process of cutting and slitting of CR/HR coils as not amounting to manufacture.
5. Comparison of the appellant company's activities with the settled legal precedent regarding cutting or slitting of steel sheet in coil form.

Analysis:

1. The issue in the present appeals revolves around the activities of decoiling, straightening, cutting, bending, and bundling of Bars and Rods undertaken by the appellant company based on a work contract with another entity. The dispute arises from whether these activities amount to manufacturing, leading to the emergence of a new product classifiable under a specific heading and chargeable to duty. The appellant contests this classification, arguing that the activities do not constitute manufacturing and, therefore, they should not be liable for Central Excise Duty.

2. The appellant company relies on Board's Circular No. 811/08/2005-CX dated 2-3-2005 to support their contention. However, the Commissioner has differentiated the processes involved in the Circular from the appellant's activities. The Commissioner highlights that the Circular specifically addresses cutting and slitting of CR/HR coils, emphasizing that the processes of decoiling, straightening, cutting to length, and bundling of Bars and Rods are distinct manufacturing processes. The Commissioner asserts that there is no specific rule or circular stating that the appellant's processes do not amount to manufacture, thereby rejecting the applicability of the Circular to the instant case.

3. The Board's stance on the activity of cutting and slitting of CR/HR coils as not constituting manufacture is emphasized. The appellant primarily engages in these processes, with decoiling being a necessary pre-process and bundling and cutting of Bars and Rods as post-processes. The Tribunal notes that the Commissioner's attempt to distinguish the Board's Circular based on pre and post-cutting activities to impose excise duty on the appellants is not justified, as the core process remains cutting and slitting.

4. The Tribunal references a precedent set by the Hon'ble Delhi High Court in the case of Faridabad Iron & Steel Traders Association v. Union of India, which established that the process of cutting or slitting steel sheets in coil form does not amount to manufacture unless a new, distinct article with a different name, character, and use emerges. This decision was upheld by the Hon'ble Supreme Court, confirming that the activity in question does not constitute manufacturing. Given the similarity between the appellant company's activities and the case precedent, the Tribunal sets aside the impugned order and allows the appeal in favor of the appellant company.

5. As the appeal of the appellant company is allowed, the Tribunal finds no justification for imposing any penalty on the entity that placed orders with them. Therefore, the appeals of the ordering entity are also allowed, concluding the matter in favor of both parties involved in the dispute.

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