2015 (11) TMI 85 - AT - Central Excise

Manufacture - digital local telephone exchange - Whether assembly, installation and commissioning of switching system along with power plant, inverter etc. would amount to manufacture - Held that - In view of the decision of Assessee s own previous case 2015 (6) TMI 401 - CESTAT NEW DELHI ; activity undertaken by the appellant does not amount to manufacture. Consequently, appellant are not required to pay duty. In these circumstances, we set aside the impugned order - Decided in favour of assessee.

Summary

Issues:
- Appeal against demand of duty, interest, and penalty
- Classification of activity as manufacture for Central Excise Duty on telephone exchanges

Analysis:
1. Demand of Duty, Interest, and Penalty:
The appellant appealed against an order demanding duty of &8377; 2,66,76,512/- along with interest and penalty. The Revenue also sought early hearing, which was dismissed as the appeal was listed promptly. The appellant, a public sector undertaking providing tele-communication services, purchased equipment for setting up telephone exchanges during 31.03.2001-31.03.2005. The Revenue claimed this activity amounted to manufacture, necessitating Central Excise Duty payment on the telephone exchanges. A show cause notice was issued, leading to the imposition of duty, interest, and penalty. The appellant contested this order, leading to the appeal.

2. Classification of Activity as Manufacture:
The appellant's counsel argued that a similar issue was addressed by the Tribunal in the appellant's Rohtak unit case, where it was held that no new goods emerged upon installation of switching systems, commonly known as telephone exchanges. The counsel referenced the Tribunal's order dated 15.04.2015, which set aside a similar demand. On the contrary, the Revenue reiterated the findings of the impugned order. The Tribunal, considering the submissions, referred to the Rohtak unit case where it was observed that the assembly, installation, and commissioning of switching equipment did not result in the emergence of a new commodity. The Tribunal emphasized that the switching systems remained unchanged even after installation, with no distinct commercial identity or use. Citing technical literature, the Tribunal concluded that no new goods emerged upon installation of switching systems, hence the activity did not amount to manufacture. Consequently, the impugned order was set aside, and the appeal was allowed.

In conclusion, the Tribunal ruled in favor of the appellant, holding that the activity of assembling, installing, and commissioning switching equipment for telephone exchanges did not constitute manufacture, thereby relieving the appellant from the duty payment. The decision was based on the precedent set in the Rohtak unit case and the lack of emergence of new goods with distinct characteristics post-installation.