2011 (6) TMI 641 - AT - Central Excise

Job work activity - appellant paid serivce tax on such activity - revenue demanded duty of excise considering the same as amounting to manufacture - appellants were in belief that their activity does not amount to manufacture and they have paid Service Tax on the job charges recovered by them form the principal manufacturer which have been accepted by the department - Held that - legal aspect of the case whether the appellants are covered under SSI exemption Notification No. 8/03 or not has not been examined by the adjudicating authority, which needs examination, matter remanded to the original adjudicating authority, stay application are disposed of

Summary

Issues: Appeal against confirmation of Central Excise duty, interest, and penalty - Whether activity of machining amounts to manufacture - Claim for waiver of pre-deposit and SSI exemption under Notification No. 8/03-CE.

Analysis:
1. The appellants contested an order confirming Central Excise duty, interest, and penalty. The dispute arose from their belief that machining activities performed for a company did not constitute manufacturing, thus Central Excise duty was not paid. However, the authorities asserted that the machining did amount to manufacturing, leading to the duty liability.

2. During the hearing, the appellants sought waiver of pre-deposit based on their Service Tax payments for job work charges. Additionally, they claimed entitlement to Small Scale Industry (SSI) exemption under Notification No. 8/03-CE due to their clearances being below the specified threshold. A certificate from a Chartered Accountant was produced to support this claim.

3. The tribunal noted that the core issue revolved around whether the appellants' machining activity could be classified as manufacturing. After granting the waiver of pre-deposit, both parties consented to the appeal's final disposal.

4. The Respondent argued that the appellants had admitted their activity amounted to manufacturing, thus Central Excise duty was rightfully imposed. Moreover, the Respondent contended that the SSI exemption claim should have been raised at the adjudication stage and cannot be introduced at the appellate level.

5. Following careful consideration, the tribunal acknowledged the appellants' belief regarding their activities but emphasized their liability to pay Central Excise duty as the machining was indeed deemed manufacturing. However, the tribunal recognized the appellants' right to claim SSI exemption, which had not been examined by the adjudicating authority.

6. Consequently, the tribunal remanded the matter to the adjudicating authority to determine the appellants' eligibility for SSI exemption under Notification No. 8/03. If found eligible, the demands would not be sustainable. The appellants were directed to provide relevant records for examination within one month.

7. Ultimately, the tribunal set aside the impugned order and disposed of the appeal and stay application accordingly, pending the adjudicating authority's review of the SSI exemption claim.