2015 (10) TMI 2349 - AT - Central Excise

Manufacture - converting H.R. Coils/strips into C.R. Strips - whether the activity undertaken by the appellants amounts to manufacture or not as per Section 2(f) of the Central Excise Act, 1944 - Held that - On the basis of the records available, the ld. Commissioner has not given independent finding thereon, who is at liberty to examine the relevant records and thereafter to arrive at a decision whether the activities undertaken by the appellant amounts to manufacture or not. - Commissioner has made an observation that the appellant has not provided co-relation of the entries in diaryA-38. Therefore, the co-relation statement cannot be relied upon. On the contrary, the contention of the ld. Counsel is that he has supplied the co-relation statement and corresponding invoices to the adjudicating authority but the same has not been considered, this fact is to be examined by the adjudicating authority. - As the impugned order has not complied with the directions of the Hon ble Apex Court, moreover, have also not examined the co-relation of the diary A-38 with the corresponding invoices, therefore, the matter needs examination at the end of the adjudicating authority. Therefore, we set aside the impugned order and remand the matter back to the adjudicating authority - Decided in favour of assessee.

Summary

Issues:
- Whether the process of converting H.R. Coils/strips into C.R. Strips amounts to manufacture as per Section 2(f) of the Central Excise Act, 1944?
- Whether the burden of proof lies on the department to show that a new and distinct commodity emerges from the manufacturing process?
- Whether the appellants provided sufficient evidence to prove that the activity undertaken does not amount to manufacture as defined under the Act?

Analysis:
- The appellants challenged the demand of duty, interest, and penalties imposed on them for converting H.R. Coils/strips into C.R. Strips, alleging duty evasion. Initially, the Tribunal held that this process did not constitute manufacture. However, the Apex Court remanded the case to consider if the process amounted to manufacture, emphasizing the burden of proof on the department to show emergence of a distinct commodity.
- In the remand proceedings, the impugned order confirmed that the process undertaken by the main appellant qualifies as manufacture under Section 2(f) of the Act, and all allegations in the show cause notice were proven. The appellants contested this decision, arguing that the adjudicating authority failed to comply with the Apex Court's directions and did not consider their contentions on merits.
- The Commissioner observed that the appellants had willingly paid excise duty on C.R. Strips without disputing their excisability, shifting the burden on them to prove that their activities did not amount to manufacture. The appellants' claim of merely reducing thickness without creating a new product was dismissed, emphasizing the emergence of a distinct commodity with a new identity.
- The Tribunal noted that the Commissioner did not conclusively decide if the appellants' activities constituted manufacture, as directed by the Apex Court. Additionally, discrepancies in the co-relation of diary entries were highlighted, requiring further examination by the adjudicating authority.
- Consequently, the impugned order was set aside, and the matter was remanded for a fresh examination in line with the Apex Court's directives, including a thorough review of diary entries and corresponding invoices to reach a lawful decision.

This detailed analysis highlights the key legal issues, the Tribunal's decision, the parties' arguments, and the need for a comprehensive re-examination by the adjudicating authority in compliance with the Apex Court's directions.