2007 (10) TMI 49 - AT - Central Excise

Modification works on moulds supplied by customers and clearance of modified moulds against payment of labor charges, does not amounts to manufacture Credit on injection moulding machine cannot be denied when it is used in testing and manufacturing components which are excisable

Summary

Issues:
1. Whether rectification/correction/modification works on moulds supplied by customers amount to 'manufacture' under Section 2(f) of the Central Excise Act.
2. Whether the appellants were entitled to avail Cenvat credit on an injection moulding machine used for testing moulds and manufacturing components.

Analysis:

1. The main challenge in the appeals was against the demands of duty and connected penalties imposed by lower authorities on the appellants for undertaking rectification/correction/modification works on moulds supplied by customers. The question at hand was whether this activity amounted to 'manufacture' under Section 2(f) of the Central Excise Act. The Tribunal considered various decisions cited by the learned Consultant supporting the appellant's contention. These decisions, such as Commissioner of Central Excise v. Dattanand Refrigeration Services Pvt. Ltd., Bombay Cycle and Motor Agency Ltd. v. Commissioner of Central Excise, and others, established that activities like repairs, reconditioning, or modifications may not amount to 'manufacture'. The Tribunal also noted Circular No. 14/87 of CBEC, which clarified that certain modifications may not be considered 'manufacture'. Ultimately, the Tribunal held in favor of the appellants, stating that duty of excise was not liable to be demanded from them for the activity in question.

2. Another issue in one of the appeals was the eligibility of the appellants to avail Cenvat credit on an injection moulding machine received in their factory. The machine was used for testing moulds and manufacturing components for customers. The lower authorities questioned the eligibility of the appellants for Cenvat credit, emphasizing the testing aspect of the machine. However, the appellants argued that the machine was used for manufacturing excisable goods, including moulds and components for customers on a job work basis. The Tribunal found that the lower authorities erred in denying Cenvat credit on the capital goods to the appellants, as the machine was indeed used in the manufacture of excisable goods. Therefore, the appeals succeeded on merits, and consequential reliefs were allowed if any.

In conclusion, the Tribunal ruled in favor of the appellants on both issues, holding that the activities related to rectification/correction/modification of moulds did not amount to 'manufacture' under the Central Excise Act and that the appellants were entitled to avail Cenvat credit on the injection moulding machine used for manufacturing excisable goods.