2011 (3) TMI 1770 - HC - Central Excise

Summary

Issues involved:
1. Interpretation of the term "manufacture" u/s 2(f) of the Central Excise Act, 1944 in relation to a unit without plant and machinery.
2. Compliance with conditions of exemption under Notification No. 214/86-C.E. for manufacture of excisable goods on job work basis.
3. Entitlement of a manufacturer without plant and machinery to avail Cenvat credit on inputs.

Issue 1 - Interpretation of "manufacture" under Central Excise Act, 1944:
The Revenue appealed against the CESTAT judgment, arguing that a unit without plant and machinery cannot be considered a "factory" under the Central Excise Act, 1944, even if no manufacturing activity is conducted on the premises. The Tribunal's decision was challenged, contending that the unit should not be classified as a factory without machinery.

Issue 2 - Compliance with exemption conditions under Notification No. 214/86-C.E.:
The Revenue raised concerns regarding the manufacture of excisable goods solely on a job work basis and whether this practice violated the conditions of exemption specified in Notification No. 214/86-C.E., dated 25-3-1986.

Issue 3 - Entitlement to Cenvat credit without plant and machinery:
The question arose whether a manufacturer operating solely on a job work basis, without any installed plant and machinery, could claim Cenvat credit on inputs and utilize the same for production.

The Tax Appeal was previously disposed of but was remanded by the Supreme Court for fresh consideration due to insufficient reasons provided in the earlier decision. The Revenue argued that the respondent's unit did not engage in manufacturing activities as there was no machinery on the premises and all work was outsourced to job workers. However, it was revealed that the respondent had paid more duty than demanded by the Revenue, making the issue revenue neutral. The respondent had also ceased storing finished goods in the unit in question, indicating a non-recurring problem.

In light of the respondent's payment exceeding the demand and the non-recurring nature of the issue, the Court disposed of the present Tax Appeal while leaving the raised questions open for future consideration if necessary, emphasizing that the decision should not be construed as an endorsement of the Tribunal's findings.