2015 (2) TMI 303 - AT - Central Excise

Duty demand - assembling of various parts - Manufacturing activity or not - Procurement of procuring the metal/brass parts, fabricated metal items and capsule mirrors, polythene tubes and packing materials, lamp shade, glass shades, decorative glasses and other items for lamp shades and light fittings - Held that - appellants were procuring the metal/brass parts, fabricated metal items and capsule mirrors, polythene tubes and packing materials, lamp shade, glass shades, decorative glasses and other items for lamp shades and light fittings. There is also a finding that all the components had been got manufactured with a specific design to match the design of the finished item and a specific item number or code number was put at the bottom of each item and cleared with brand name, logo and price tag in a cartoon as finished item. Thus, it is clear that appellant do not manufacture any component of lamp shade/chandeliers or other light fittings but procure the various component of the chandeliers lamp shades and light fittings of a particular design and packed the same in a box. In over view, this activity of the appellant would not amount to manufacture. - Since activity of the appellant does not amount to manufacture and as such the duty demand is not sustainable on merits. Even on limitation also, the duty demand is not sustainable as it is seen that KLS (MU) vide its letter dated 3/4/1989 addressed to Superintendent had intimated department that a part of the factory premises is being leased to another firm which would be conducting trading activity of the retailing of the goods sold to them and other goods purchased by them from the market. Thus, the department was fully aware of the existence of the appellant unit and its activity. In view of this, the longer limitation period of 5 years under proviso of the section 11A(1) of Central Excise 1944 would not be applicable and as such the duty demand raised vide show cause notice dated 31/1/2000 would be time barred. In this regard, the department s contention that the letter dated 3/4/1989 did not mention the exact activity of the appellant, is not acceptable, as once it has been intimated by KLS (MU) to the department that a portion of the factory has been leased by them to another firm for trading activity and along with this letter the ground plant had also been enclosed, it was for the department to ascertain as to what trading activity was being carried on there. In view of the above discussion, the impugned order is not sustainable. The same is set aside. - Decided in favour of assessee.

Summary

Issues:
1. Whether the activity of the appellant amounts to manufacture of goods attracting Central Excise Duty.
2. Whether the duty demand raised by the show cause notice is time-barred.

Detailed Analysis:

1. The primary issue in this case was whether the activity of the appellant, a retailing proprietorship firm, amounted to the manufacture of goods attracting Central Excise Duty. The appellant procured various components of lamp shades and chandeliers from different sources, packed them in cartons, and labeled them with their logo and product code. The department contended that this activity constituted manufacture under the Central Excise Tariff Act. The Additional Commissioner confirmed the duty demand, interest, and penalties, which were upheld by the Commissioner (appeals). The appellant argued that their activity did not create new products with distinct characteristics and usage, citing precedents where similar activities were not considered as manufacture. The Tribunal agreed with the appellant, stating that the activity of procuring and packaging components did not amount to manufacture, as established by previous judgments. Therefore, the duty demand against the appellant was deemed unsustainable on merits.

2. The second issue revolved around the timeliness of the duty demand raised by the show cause notice. The appellant argued that the demand for the period from 1/1/1998 to 31/3/2000 was time-barred as the extended limitation period under the Central Excise Act did not apply. The appellant had informed the department in 1989 about the existence of the retail shop in the factory premises, engaging in trading activities. The department contended that the letter did not specify the exact activity of the appellant. However, the Tribunal held that the department was aware of the appellant's existence and trading activity based on the information provided in 1989. Therefore, the longer limitation period of 5 years under the Act was not applicable, rendering the duty demand raised in 2003 time-barred. Consequently, the impugned order was set aside, and the appeal was allowed.