2016 (6) TMI 1058 - AT - Central Excise

Manufacturing activity or not - activity of cutting marble blocks into slabs / tiles - deemed manufacture - Held that - the activity of cutting and polishing, sizing of marble slabs, other stones for cutting of marbles into slabs and tiles of Marble was conferred deeming character, which amount to manufacture by way of insertion of Note 6 of Chapter 25 of the Central Excise Act with effect from 1.3.2006. This fact also leads us to hold that the activity of cutting or polishing or conversion of blocks into tiles was held to be deemed manufacturing process by way of introduction of such chapter, inasmuch as they were otherwise not covered by the definition of manufacture as appearing in section 2(f) of the Central Excise Act. The said deeming fiction was created with effect from 1.3.2006. Inasmuch as the period involved in the present appeal is January, 2004 to October, 2004, i.e. prior to 1.3.2006 - No demand - Decided against the revenue.

Issues:
1. Whether the activity of cutting marble blocks into slabs/tiles amounts to manufacture for the purpose of excise duty liability.
2. Whether the appellant was actually converting the stone into slabs and tiles, and if so, whether it amounts to manufacture.
3. Whether the Tribunal's decision in the case of Associated Stone Industries should be followed in determining the manufacturing process.
4. The impact of the insertion of Note 6 of Chapter 25 of the Central Excise Act on the activity of cutting or polishing marble slabs.

Analysis:
1. The case involved a dispute where the Revenue contended that cutting marble blocks into slabs/tiles constitutes manufacturing, attracting excise duty liability. The original adjudicating authority had dropped the show cause notice, ruling that this activity did not amount to manufacture. The Commissioner (Appeals) upheld this decision, emphasizing that the process did not result in a new commercial product. The Tribunal, considering various precedents including the Supreme Court's decision in Aman Marble Industries, concurred that cutting and polishing stone into slabs did not amount to manufacture as no distinct product emerged. The Tribunal also cited relevant decisions to support this view.

2. The Revenue argued that despite the legal position outlined in the Aman Marble Industries case, the appellants were indeed converting stone into slabs and tiles, which should be classified as manufacturing. However, the Tribunal noted the lack of evidence proving that the cleared slabs were actually tiles. It highlighted the consistency of decisions, including the Hon'ble Supreme Court's approval of a case where the final product was marble tiles, indicating that the issue was adequately addressed by the Commissioner (Appeals) based on the existing legal framework.

3. The Tribunal addressed a conflicting Tribunal decision in the case of CCE Jaipur I vs. Agarwal Marbles & Industries Ltd., which supported the Revenue's stance. However, the Tribunal found that this decision did not consider the precedent set by the Associated Stone Industries case, which was confirmed by the Supreme Court. Emphasizing the binding nature of Supreme Court decisions, the Tribunal reiterated that the conversion of blocks into tiles had been settled by the Hon'ble Supreme Court in the Associated Stone case and needed to be followed.

4. Additionally, the Tribunal discussed the impact of Note 6 of Chapter 25 of the Central Excise Act, which deemed the activity of cutting, polishing, and converting blocks into tiles as manufacturing from March 1, 2006. Since the appeal pertained to a period before this amendment (January 2004 to October 2004), the Tribunal found no merit in the Revenue's argument. The introduction of the deeming provision post the relevant period further supported the conclusion that the activity did not constitute manufacturing during the period in question. Consequently, the appeal was rejected based on the legal framework and precedents cited.

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