2016 (2) TMI 780 - AT - Central Excise

Manufacture - whether the activity of modification of moulds and dies amount to manufacture therefore it is liable to excise duty ? - applicability of provision of Rule 4(5)(a) - exemption under Notification No. 214/86-CE dated 25/3/1986 - Held that - Rule permits to send the capital goods to job worker for further processing, testing, repair, re-conditioning or manufacture of intermediate goods necessary for manufacturing of final product or any other purpose. In view of this clear provisions, the appellant has correctly followed the procedure laid down under Rule 4(5)(a). Even if it presumed that the activity is manufacture it will remain exempted under Notification No. 214/86-CE dated 25/3/1986 according to which if any goods manufactured on job work basis on material supplied by the principal manufacturer and said manufactured goods is used in the factory of the principal manufacturer, the said goods are exempted from the payment of whole of duty. In the present case the moulds supplied by Bhoisar unit to the appellant and appellant after carried out the activity returned back the moulds to the Bhoisar unit where it was used for the manufacture of other final product i.e. plastic parts on which excise duty is undisputedly paid. In this position even if by any stretch of imagination the activity held to be manufacture though not accepted by us, the moulds will remain exempted under the notification No. 214/86-CE. Facts in the judgments cited by the Ld. A.R. are not relevant to the facts of the present case therefore not help the case of the Revenue. In view of the above discussion, we are of the considered view, firstly the activity is not amount to manufacture, secondly the movement and activity of modification is squarely covered by Rule 4(5)(a) of CCR, 2002 therefore the demand is illegal and incorrect - Decided in favour of assessee

Summary

Issues involved:
1. Whether the activity of modification of moulds and dies amounts to manufacture and is liable to excise duty.
2. Whether the appellant correctly followed the procedure under Rule 4(5)(a) of CCR, 2002 regarding sending capital goods to a job worker for further processing.

Issue 1:
The appeal was filed against the rejection of the appellant's appeal by the Commissioner of Central Excise (Appeals) regarding the modification of moulds and dies. The Revenue argued that the modification activity amounted to manufacture, thus making it liable for excise duty. The appellant contended that the modification did not change the identity of the goods and should be considered repair and maintenance, not manufacture. The Tribunal found that the modification did not alter the identity of the moulds into a different product. The activity, in their view, could not be classified as manufacture. The Tribunal also referenced Rule 4(5)(a) of CCR, 2002, which allows sending capital goods to a job worker for various purposes, including repair and re-conditioning. Even if the activity was considered manufacture, it would be exempt under Notification No. 214/86-CE if the goods were used in the factory of the principal manufacturer. The judgments cited by the Revenue were deemed irrelevant to the present case. Consequently, the Tribunal set aside the impugned order, allowing the appeal with any consequential relief.

Issue 2:
The appellant argued that they followed the procedure under Rule 4(5)(a) of CCR, 2002 by sending the moulds for re-conditioning to the job worker and receiving them back for further use in manufacturing final products. The Tribunal agreed that the appellant correctly followed the provisions of Rule 4(5)(a) by sending the capital goods for further processing. They emphasized that the movement and modification activity were covered by this rule, making the demand for duty illegal and incorrect. Therefore, the Tribunal allowed the appeal based on the correct interpretation and application of Rule 4(5)(a) and the exemption under Notification No. 214/86-CE.

In conclusion, the Tribunal ruled in favor of the appellant, stating that the modification activity did not amount to manufacture and was covered under Rule 4(5)(a) of CCR, 2002. The demand for excise duty was deemed illegal, and the appeal was allowed with any consequential relief as per the law.