2015 (12) TMI 671 - AAR - Central Excise

Manufacture - activity of grading of diamonds which have been imported or received by them in respect of their colour, clarity, cut and their weight in carats. - second activity undertaken is that of inscription - Held that - Applicant does not manufacture the diamonds in the sense that it does not chemically bring out the diamonds and it is only the natural diamonds with which the applicant deals. Therefore, even by way of common sense this cannot amount to a manufacturing activity . All that the applicant does is, besides it undertakes the activity of grading the diamonds, it also does some activity of inscription because of which the essential character of the diamonds does not change and it still remains the diamond. - none of these activities could amount to the manufacture of diamonds so as to invite the provisions of Central Excise Act. A contention was raised by Shri Jain that the activity of certification may invite some duty as it amounts to service. However, we clarify that we are not deciding that issue, since, we are not asked the question as to whether the certification of diamonds amounts to service or not in this application. - activity undertaken by the applicant does not amount to manufacture and, hence, will not attract the provisions of Central Excise - Appeal disposed of.

Summary

Issues:
Whether the proposed activity of grading and inscription of diamonds by IIDGR India Private Limited would amount to manufacture under Central Excise legislation.

Analysis:
The case involved an application by International Institute of Diamond Grading and Research India Private Limited (IIDGR) seeking a ruling on whether their proposed activities of grading and inscribing diamonds would constitute manufacturing under Central Excise legislation. The applicant described their activities of grading diamonds based on color, clarity, cut, and weight, as well as inscribing a unique identification number on diamonds to ensure traceability. The applicant also mentioned certifying the grade of diamonds as part of their operations.

The Authority noted that the Department did not seriously contend that the activities amounted to manufacturing of diamonds. It was clarified that the applicant did not chemically bring out diamonds but dealt with natural diamonds. The activities of grading, inscription, and certification did not alter the essential character of the diamonds, which remained diamonds throughout the process. The Authority highlighted that the proposed invoicing services provided by IIDGR did not change the nature of the activities.

The Authority concluded that none of the activities undertaken by IIDGR amounted to the manufacture of diamonds under the Central Excise Act. While a contention was raised regarding certification possibly attracting duty as a service, the Authority did not address this issue as it was not raised in the application. The ruling was made in favor of the applicant, stating that their activities did not constitute manufacturing and thus would not attract the provisions of Central Excise. The application was disposed of at that stage, with the ruling provided in the negative for the applicant.