2006 (6) TMI 452 - AT - Central Excise

Summary

Issues:
Claim of refund for Central Excise duty paid under protest by M/s. Maharashtra State Electricity Board. Allegation of manufacturing and clearing excisable goods without payment of duty. Appeal against penalty under Rule 173Q of the Central Excise Rules, 1944. Review application by the department under Sec. 35E(4) of the Central Excise Act, 1944. Appeal filed by the department before the Hon'ble Supreme Court challenging the fabrication activity as constituting manufacture.

Analysis:
The case involved a claim of refund for Central Excise duty amounting to Rs. 2,87,474/- paid under protest by M/s. Maharashtra State Electricity Board. The appellant was alleged to have manufactured and cleared excisable goods without paying duty, maintaining proper accounts, or following the prescribed procedures. The demand was initially set at Rs. 2,87,474.58 but was later reduced to Rs. 1,64,162.10, with an additional penalty of Rs. 1,50,000 imposed under Rule 173Q of the Central Excise Rules, 1944.

Upon adjudication, the appeal was decided in favor of the appellants, leading to the refund claim being sanctioned by the Dy. Commissioner of Central Excise and Customs. However, the department filed a review application under Sec. 35E(4) of the Central Excise Act, 1944, challenging the refund. The Commissioner (Appeals) Aurangabad allowed the department's appeal, prompting the Hon'ble Supreme Court to set aside the Tribunal's order and remand the case for fresh consideration.

The main contention revolved around whether the fabrication activity undertaken by the appellants constituted "manufacture" attracting duty liability. The appellant argued that the fabricated items were not intended for sale in the market and did not meet the criteria of "excisability" and "marketability" as required by the Central Excise Act, 1944. The judgment emphasized that the goods in question, fabricated for the erection of electricity lines, were not meant for commercial trading and thus did not trigger duty liability.

After considering the submissions and legal precedents cited, the judgment concluded that the fabricated items did not meet the conditions for duty liability. Therefore, the amount paid under protest was deemed refundable, and the appeal was allowed with consequential relief. The decision highlighted the distinction between goods intended for commercial trade and those used for specific operational purposes, ultimately absolving the appellants of duty liability in this case.