2007 (9) TMI 123 - AT - Central Excise

Activity of coating MS pipes with coal tar enamel / polyethylene did not amounts to Manufacture Amendment to Heading 73.06 have no effect because dispute is prior to that amendment Pipes are not different in name, character or use after coating Not liable to pay duty Appeal allowed

Summary

Issues:
Classification of coated pipes under Central Excise Tariff Act, Duty liability on coated pipes, Time-bar for demand, Penalty imposition under Section 11AC, Interpretation of "manufacture" under Section 2(f) of the Central Excise Act.

Classification of Coated Pipes:
The appellants undertook coal tar enamel and polyethylene coating on bare MS pipes supplied by M/s. Indian Oil Corporation Ltd. The department contended that this process amounted to "manufacture" as it created a new product with distinct characteristics. The appellants argued that the process did not amount to "manufacture" as per Supreme Court rulings and Chapter Notes of the Central Excise Tariff Act. The Commissioner classified the coated pipes under Heading 73.04 and held duty leviable, rejecting the plea of time-bar and imposing penalties.

Duty Liability and "Manufacture" Interpretation:
The appellants believed that coating the pipes did not change the name, character, or use of the commodity, thus not constituting "manufacture" under Section 2(f) of the Central Excise Act. They cited Tribunal decisions and Apex Court judgments to support their stance. The Tribunal examined the coating process, noting that the pipes were still known as MS pipes, and found that the activity did not result in a different product. The Chapter Notes did not consider coated pipes separately, and the process did not meet the criteria for "manufacture."

Time-bar for Demand and Penalty Imposition:
The Commissioner invoked the extended period of limitation, rejecting the plea of time-bar and imposing a penalty under Section 11AC. The appellants argued that the demand was time-barred, and no penalty or interest was applicable due to the reversal of Cenvat credit. The Tribunal considered the relevant case laws and held that the activity of coating did not amount to "manufacture" during the material period, thus setting aside the duty liability and penalties imposed.

Conclusion:
The Tribunal ruled in favor of the appellants, stating that the coating process on MS pipes did not constitute "manufacture" under the Central Excise Act. The activity did not result in a different product, and the Chapter Notes did not distinguish between bare and coated pipes during the relevant period. The order was set aside, and the appeal was allowed, highlighting that the appellants were not liable to pay excise duty on the coated pipes supplied to M/s. IOCL.