2012 (12) TMI 343 - AT - Central Excise

Whether machining and drilling of holes activity amounts to manufacture - rough forgings - Held that - Goods received by TWGI are rough forgings classifiable under Heading 7326 - products which emerges after being subjected to machining and drilling of holes by TWGI are clearly identifiable as a part of excavators and can be directly used, as such, and the same are classifiable as part of the earth moving machinery under sub-heading 84314990 - processes undertaken by TWGI would amount to manufacture and, hence, attract Central Excise duty - TWGI never informed the department about their activity - penal provision of Rule 26 of Central Excise Rules, 2002 would be attracted

Summary

Issues:
1. Whether the activity of a partnership concern amounts to manufacture under Central Excise Act, 1944.
2. Validity of duty demand, interest, and penalties imposed on the appellants.
3. Application of extended period for duty demand and penalty imposition.
4. Eligibility for Cenvat credit and pre-deposit requirements.

Analysis:

Issue 1: Activity Classification
The case revolved around whether the activity of a partnership concern, engaged in job work, amounts to "manufacture" under the Central Excise Act, 1944. The appellants argued that the processes undertaken did not result in a new product with distinct commercial identity, name, character, or usage, as required for classification as manufacture. They relied on legal precedents to support their stance, emphasizing that no wilful misstatement or suppression of facts occurred. However, the tribunal found that the processed products were identifiable as parts of excavators, meeting the criteria for manufacture as per legal standards.

Issue 2: Duty Demand and Penalties
The Commissioner had confirmed a duty demand against the partnership concern, imposing penalties on them and other related parties. The appellants challenged the validity of these demands and penalties. The tribunal, after considering submissions from both sides, concluded that the processes undertaken did amount to manufacture, justifying the duty demand. It also found merit in invoking penal provisions against the concerned parties, ruling in favor of the department on these matters.

Issue 3: Extended Period Application
Regarding the application of the extended period for duty demand and penalty imposition, the tribunal noted that the partnership concern had not informed the department about their activities. This lack of disclosure supported the department's plea for invoking the longer limitation period. The tribunal acknowledged that the detailed examination of the limitation issue would be necessary during the final hearing.

Issue 4: Cenvat Credit and Pre-Deposit
The tribunal directed the partnership concern to pay a specified amount within a set timeframe, considering their potential eligibility for Cenvat credit. It also mandated penalties for other related parties. Compliance deadlines were set, and upon payment within the stipulated period, the requirement for further pre-deposit was waived, and recovery stayed pending appeal disposal.

In conclusion, the tribunal's decision upheld the duty demand, penalties, and application of the extended period, while providing specific directives for payment and compliance, balancing the interests of the concerned parties in the legal proceedings.