2008 (2) TMI 333 - AT - Central Excise

Assembling of cooling tower amounts to manufacture merely because premises in question does not have sufficient electricity facility, it cannot be said that the activities do not amount to manufacture appellant was under the impression that the mere act of assembling goods did not amount to manufacture - non-payment of duty at the relevant time was bona fide - entire duty paid on past clearances on resalising the implications of the activities penalty set aside

Summary

Issues:
1. Liability of excise duty on the respondent.
2. Imposition of penalties on the respondent and the power of attorney holder.
3. Determination of manufacturing activity without machinery or electricity.
4. Justification of setting aside the adjudication order by the Commissioner (Appeals).

Analysis:

Issue 1: Liability of excise duty on the respondent
The appeal was filed by the Revenue against the order imposing excise duty, penalties, and interest on the respondent. The respondent was engaged in the manufacture of cooling towers using various items as inputs. The Revenue contended that these activities amounted to manufacturing, making the respondent liable for excise duty. The Tribunal agreed with the Revenue's position, stating that the activities resulted in a new product, meeting the definition of 'manufacture' under the Central Excise Act. The Tribunal found the adjudication order demanding excise duty to be valid.

Issue 2: Imposition of penalties
Regarding the penalties imposed on the respondent and the power of attorney holder, the Tribunal noted that there was no intention to evade excise duty. The respondent had paid the entire duty on past clearances upon realizing their obligation. The Tribunal considered the non-payment of duty to be bona fide and decided to set aside the penalties imposed on the respondent based on the circumstances of the case.

Issue 3: Determination of manufacturing activity without machinery or electricity
The Commissioner (Appeals) had set aside the adjudication order, arguing that the respondent did not have machinery or electricity, and therefore, could not be considered engaged in manufacturing. The Tribunal disagreed, emphasizing that the presence of machinery or electricity is not determinative of manufacturing activity. The Tribunal held that the respondent's activities, resulting in the creation of a new product with a distinct identity, constituted manufacturing, irrespective of the lack of machinery or electricity.

Issue 4: Justification of setting aside the adjudication order
The Commissioner's decision to set aside the adjudication order was based on the belief that the respondent was merely trading goods without engaging in manufacturing. However, the Tribunal found this reasoning flawed, emphasizing that the respondent's activities met the criteria for manufacturing under the law. The Tribunal overturned the Commissioner's decision, affirming the adjudication authority's order and allowing the appeal filed by the Revenue.

In conclusion, the Tribunal upheld the liability of excise duty on the respondent, set aside the penalties imposed due to the lack of intent to evade duty, clarified that manufacturing activity can occur without machinery or electricity, and reversed the Commissioner's decision to invalidate the adjudication order based on incorrect reasoning.