2015 (12) TMI 939 - AT - Central Excise

Manufacture - manufacture of Steel tubular poles which are manufactured by joining MS pipes of different diameters by welding - Cancellation of excise registeration - Held that - The appellant have two units in the specified area of Jammu Region of state of Jammu and Kashmire, and both the units were manufacturing same product which is made by joining MS pipes of different diameters by welding and swaging. There is no dispute that unit I had earlier taken Central Excise Registration and was paying duty and availing Notification 56/2002-CE, but in respect of this unit the Jurisdictional Additional Commissioner vide Order in original dated 31.03.2008 had passed an order holding that its activity does not amount to manufacture, in view of Apex Court s judgment in the case of Hindustan Poles Corporation (2006 (3) TMI 2 - SUPREME COURT ) and on this basis, had ordered cancellation of the central excise registration and had also confirmed the cenvat credit demand alongwith interest. It is also seen that this order dated 31.03.2008 had been passed by the Additional Commissioner after the Apex Court s judgment dated 28.03.2008 in the case of Prachi Industries (2008 (3) TMI 25 - Supreme court) wherein the Apex Court after distinguishing its earlier judgement in the case of Hindustan Poles Corporation, had taken a contrary view holding that joining of duty paid MS pipes of different diameters by welding and swaging would amount to manufacture. Commissioner while confirming the duty demand in the impugned order has also allowed the cenvat credit which according to the appellant is ₹ 23,59,833/- and thus, only the differential amount of ₹ 11.00 Lakhs may be payable by the appellant through PLA which would be exempt only if the benefit of Notification No.56/2002-CE is applicable. The question as to whether in the circumstances of the case the benefit of Notification No.56/2002/CE can be extended to them requires serious consideration which cannot be done at this stage. In view of this, we are of the view that this is not the case for total waiver. - Partial stay granted.

Summary

Issues:
1. Whether the appellant's activity amounts to manufacture.
2. Validity of duty demand and cenvat credit eligibility.
3. Application of Notification No.56/2002-CE for exemption.

Analysis:

Issue 1:
The case involved determining whether the appellant's activity of joining MS pipes to manufacture steel tubular poles constitutes "manufacture." The Additional Commissioner, relying on the Apex Court's judgment in Hindustan Poles Corporation case, held that the activity did not amount to manufacture for Unit I. However, the Apex Court's subsequent judgment in Prachi Industries case stated that such activity does amount to manufacture. Consequently, for Unit II, a duty demand was raised based on the Prachi Industries judgment. The Commissioner confirmed this duty demand, considering the activity as manufacture.

Issue 2:
The duty demand of Rs. 34,57,913/- for Unit II was found to be within the time limit. The Commissioner allowed cenvat credit of Rs. 23,59,833/-, leaving a differential amount of Rs. 11.00 Lakhs payable by the appellant. The eligibility of the appellant for exemption under Notification No.56/2002-CE was a point of contention. The Tribunal directed the appellant to deposit Rs. 2.00 Lakhs within four weeks, with the remaining amount waived upon compliance, pending further consideration of the Notification's applicability.

Issue 3:
The appellant argued that the benefit of Notification No.56/2002-CE should apply, citing the location of the unit and the absence of a show cause notice for Unit I engaged in similar activity. The respondent contended that the appellant failed to follow the prescribed procedure for availing the exemption. The Tribunal did not conclusively address the applicability of the Notification, emphasizing the need for further examination.

In conclusion, the Tribunal upheld the duty demand for Unit II as per the Prachi Industries judgment, requiring a partial deposit by the appellant. The issue of Notification No.56/2002-CE exemption eligibility remained inconclusive, warranting further scrutiny.