2011 (5) TMI 730 - AT - Central Excise

Pre-deposit and penalty of identical amount imposed under Rule 25 read with Section 11AC of Central Excise Act, 1944 - telephone in SKD condition - appellants submitted that inasmuch as the goods were assessed to Customs duty as telephone and they have paid the duty on the same as telephone, it was not permissible to the Department to allege that by assembling various parts of the telephone, they have again manufactured the same in their factory - Held that - in the case of M/s. Eureka Forbes Ltd.(2000 - TMI - 48840 - CEGAT, COURT NO. II, NEW DELHI), wherein it was held that the packing of various parts of Aquaguard in a new carton along with some other bought out items will not result in manufacturing activity, in the case of M/s. Kitchen Grace (2005 - TMI - 54722 - CESTAT, WEST ZONAL BENCH, MUMBAI), assembling of a furniture received in knock-down condition with necessary hardware fittings in loose condition will not amount to manufacture, pre-deposit of duty and penalty waived and allow stay petition

Summary

Issues:
Classification of goods as telephone for import duty assessment.
Whether assembling of imported goods amounts to manufacturing.
Interpretation of Section Note 6 of Section XVI of Customs Excise Tariff Act, 1985.
Applicability of previous tribunal decisions on similar cases.

Analysis:
1. The appellant imported telephones in unassembled condition and classified them as telephones for duty assessment based on Circular No. 55/1995 and Rule 2(a) of General Rules of Interpretation.
2. Revenue alleged that assembling, testing, and packing the imported goods in the factory constituted manufacturing, initiating proceedings for excise duty payment.
3. The Commissioner considered the activity as manufacturing based on Note 6 of Section XVI of Customs Excise Tariff Act, 1985, which defines manufacturing for incomplete articles with essential characteristics of complete articles.
4. The appellant argued that assembling parts did not amount to manufacturing as the imported goods were already complete telephones, supported by a certificate from the supplier and customs classification.
5. The Tribunal noted that the goods were imported and assessed as complete telephones, concluding that subsequent assembling did not constitute manufacturing, citing previous decisions in similar cases.
6. Relying on precedents like M/s. Eureka Forbes Ltd. and M/s. Kitchen Grace, the Tribunal held that assembling imported goods does not amount to manufacturing, allowing the stay petition and waiving the pre-deposit of duty and penalty unconditionally.