2007 (2) TMI 26 - AT - Central Excise

Excisability Alleged that appellant has manufactured Transmission Apparatus Radio Telephony classifiable under SH 85.25 of CET without following CE formalities and accordingly demand for duty, penalty and interest Authority set aside the impugned order and allow the appeal

Summary

Issues:
Classification of goods under Central Excise Tariff, Manufacture of Transmission Apparatus for Radio Telephony, Excisability of assembled goods, Applicability of duty and penalty, Jurisdictional aspects in excise matters.

Classification of Goods under Central Excise Tariff:
The Commissioner found that the Transmission Apparatus for Radio Telephony (TART) assembled by ECPL was classifiable under Chapter Heading 85.25 of the Central Excise Tariff, attracting Basic Excise Duty at 16% ad valorem. The components imported by Aircel and procured by ECPL were observed to have individual functions, forming parts of the transmission apparatus. The systematic assembly of these components resulted in the creation of intermediate products and eventually the TART, which was considered a new good under the tariff.

Manufacture of Transmission Apparatus for Radio Telephony:
The assembling and integration of components into the TART by ECPL were deemed to amount to manufacture. The Commissioner relied on Note 6 to Section XVI of the Central Excise Tariff Act, 1985, which states that converting an incomplete article into a complete one constitutes manufacture. The TART was distinguished from its components by having a new name, characteristics, and use. The Tribunal upheld this view, considering the TART as excisable goods.

Excisability of Assembled Goods:
The Tribunal analyzed the nature of the assembled TART and its components, emphasizing that the network of Mobile Switching Centres (MSC), Base Station Controllers (BSC), and Base Transceiver Stations (BTS) was site-specific and not easily movable without substantial changes in hardware and software configuration. The appellants argued that their activity of installing the imported components did not amount to manufacture and was already subject to Service Tax, hence exempt from Central Excise duty.

Applicability of Duty and Penalty:
The Commissioner had imposed duty and penalties on ECPL and Aircel for alleged non-compliance with Central Excise formalities. However, the Tribunal noted that the components were tested after assembly before export to India, and the activity of installation and commissioning had already attracted Service Tax. The Tribunal found that the impugned order lacked merit, setting it aside and allowing the appeals.

Jurisdictional Aspects in Excise Matters:
The Tribunal considered the jurisdictional limitations of the adjudicating authority in deciding the excisability of goods, particularly when critical components of the system were located outside their jurisdiction. The appellants successfully argued that the Commissioner could not determine the classification or valuation of goods based on components situated outside his jurisdiction, leading to the setting aside of the impugned order.

In conclusion, the Tribunal ruled in favor of the appellants, highlighting the distinction between assembly/installation activities and manufacturing processes for excisable goods, ultimately setting aside the Commissioner's order and allowing the appeals.