2011 (3) TMI 1105 - AT - Central Excise

Non payment of duty - Computerized Wheel Aligner, sold by the appellants to their customers - During the course of investigation the Revenue recorded statements of Director of the unit & entertained a view that appellants are manufacturing the wheel aligner and were clearing the same without payment of duty - the appellant on the ground that duty liability has to be addressed in the condition at which the goods were removed from the factory as such it stands contended that admittedly the goods which left in their factory were bought out items without any further process done upon the same, they cannot be held to be Computerized Wheel Aligner - Held that - As no activity is admittedly done by the appellants in their factory - The goods are only cleared under one invoice - Further, the goods are not even brought to the factory and are cleared from the godown itself or sometimes directly from the vendor s premises - As such, to hold that the appellant is a manufacturer of wheel aligner, in respect of the various bought out goods cleared in one invoice, would not be in accordance with the law - Merely because the appellant did not inform the department, by itself cannot be made a ground to attribute them with any malafide or deliberate suppression with an intent to avoid payment of duty - When the said trading activities being reflected in the statutory records and in the returns filed with the sales tax authorities, it cannot be held that there was any intent to evade payment of duty, on the part of appellants accordingly hold that the demand is also hit by bar of limitation - Decided in favour of assessee.

Issues Involved:
1. Whether there is any product known in the market as Computerized Wheel Aligner.
2. Whether the noticee is undertaking any process which amounts to manufacture under the provisions of Section 2(f) of the Central Excise Act, 1944.
3. Whether the equipment, Computerized Wheel Aligner, is chargeable to duty.
4. Whether the extended period is invokable in the facts and circumstances of the case.
5. Whether the noticees are liable for penal action.
6. Whether interest in terms of Section 11AB of the Central Excise Act, 1944, is recoverable from the said assessee.

Issue-wise Detailed Analysis:

1. Whether there is any product known in the market as Computerized Wheel Aligner:
The Commissioner concluded that the Computerized Wheel Aligner is an independent machine known in the market and is an excisable commodity different from its parts. However, the Tribunal emphasized that the primary issue is whether any manufacturing process has been undertaken by the appellant.

2. Whether the noticee is undertaking any process which amounts to manufacture under the provisions of Section 2(f) of the Central Excise Act, 1944:
The Tribunal found that the appellant was purchasing five different items, dispatching them to the customer's premises under one invoice, and using them to check vehicle alignment. These items were temporarily connected at the customer's site and then stored separately after use. The Tribunal held that merely delivering these items and assisting in their temporary assembly does not constitute manufacturing. The Tribunal relied on a Chartered Engineer's certificate and the Andhra Pradesh High Court's decision in XI Telecom Limited, which stated that merely putting items together without transforming them into a new product does not amount to manufacture.

3. Whether the equipment, Computerized Wheel Aligner, is chargeable to duty:
Since the Tribunal concluded that no manufacturing process was undertaken, the Computerized Wheel Aligner, as delivered by the appellant, is not chargeable to duty. The Tribunal emphasized that the bought-out items were delivered without any further processing, and merely assembling these items temporarily at the customer's site does not change their nature to make them excisable.

4. Whether the extended period is invokable in the facts and circumstances of the case:
The Tribunal found that the demand was confirmed by invoking the extended period of limitation. However, since the appellant's activities were reflected in their commercial invoices and sales tax returns, the Tribunal held that there was no malafide intent or deliberate suppression with the intent to evade duty. Therefore, the demand is hit by the bar of limitation.

5. Whether the noticees are liable for penal action:
Given that the Tribunal concluded no manufacturing activity took place and the demand was time-barred, the penalties imposed on the appellants were set aside. The Tribunal found no basis for penal action as the appellants were not engaged in any manufacturing process that would attract excise duty.

6. Whether interest in terms of Section 11AB of the Central Excise Act, 1944, is recoverable from the said assessee:
Since the Tribunal set aside the demand for duty and penalties, the question of recovering interest under Section 11AB does not arise. The Tribunal held that no duty liability existed, and therefore, no interest could be recovered.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeals with consequential relief to the appellants. The Tribunal held that the appellant's activities did not amount to manufacture under the Central Excise Act, 1944, and the demand was also barred by limitation. Consequently, the penalties and interest imposed were also set aside.

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