2014 (3) TMI 830 - AT - Central Excise

Duty demand - Whether reprinting of dial and change of strap on the duty paid watches is a repair activity or the same amounts to manufacture of a new wrist watches so as to attract duty liability again - Held that - there is no denial of fact that apart from putting their customers logo on the dial and change of strap, no other process is undertaken on the said wrist watches. The appellate authority has held that there is intermixing of various other parts and a particular part which was originally with a particular wrist watch may find its place in another wrist watch. However, we find that the above cannot be made the basis for holding that the activity amounts to manufacture. The duty paid cleared watches were received back by the appellants and after undertaking some process on the same, wrist watches were cleared from the factory. No new product having a different name, use and character comes into existence. Wrist watches remains wrist watches in spite of dial of the watch having been embossed with the customers logo - activity undertaken by the appellant does not amount to manufacture. As such, confirmation of demand of duty against them on the said ground is not sustainable - Decided in favour of assessee.

Summary

Issues:
Manufacture of new watches due to dial printing and strap change on duty paid watches.

Analysis:
The case involved the appellants engaged in manufacturing wrist watches, clearing them to C & F agents with their brand name printed on the dial. The issue arose when a show cause notice was served proposing a duty demand, alleging that by reprinting dials and changing straps on duty paid watches, the appellants were manufacturing new watches. The appellants argued that their activity did not constitute manufacturing as no new product emerged, relying on Rule 173H. However, the original adjudicating authority and Commissioner (Appeals) disagreed, leading to the present appeal.

The appellate authority considered whether reprinting dials and changing straps on duty paid watches constituted repair activity or manufacturing new watches. The Commissioner (Appeals) reasoned that the activity amounted to manufacturing as the watches were dismantled, parts separated, and reassembled with new components, resulting in watches with different names and characters. The authority held that reassembly was incidental to manufacturing, citing Section 2(f) of the Central Excise Act, 1944. However, the appellate tribunal found that despite changes made, the watches remained the same product, rejecting the argument that intermixing parts constituted manufacturing.

The tribunal referred to precedents like Sudhir Engineering Co. v. C.C.E., Daman, emphasizing that replacing parts did not amount to manufacturing if a new article was not produced. It also cited C.C.E., Meerut v. Samtel Colour Lab., where intermixing parts did not constitute manufacturing. The tribunal differentiated the case from Tecumesh Product India Ltd. v. C.C.E, Hyderabad, concluding that the activity undertaken by the appellants did not amount to manufacturing. Consequently, the demand of duty was deemed unsustainable, and the appeal was allowed in favor of the appellants.