2016 (7) TMI 771 - AT - Central Excise

Manufacture - Demand of differential duty - appellants have taken CENVAT credit on the bars/strips and paid duty on the said final products @16% ad valorem till 28-02-2004 and @ 8% ad valorem from 01-03-2004 to 30-06-2004. However they stopped paying duty from July 2004 onwards and sought to classify the said final products under CETH 7206.90 of the Tariff on the contention that the processes carried out by them do not amount to manufacture. The department however entertained the view that the said final products correctly fall under Chapter heading 7308 of the Tariff and not under Chapter 72 and hence a show cause notice dated 08-04-2005 was issued to the appellant proposing demand of differential duty for the period March 2004 to June 2004 Held that - process undertaken by the respondents do not amount to manufacture as the MS rods, plates, angles etc. remain the same even after the process have been carried out. Therefore, there is no new manufacturing process involved. - Demand set aside.

Summary

Issues:
Classification of final products under Central Excise Tariff, Manufacturing processes of cutting, drilling, and galvanization, CENVAT credit, Duty payment rates, Applicability of Chapter headings, Liability of Central Excise duty, Legal interpretation of processes as manufacture, Bar on demands under the law of limitation.

Analysis:

Classification of Final Products:
The dispute revolves around whether the processes of cutting, drilling, and galvanizing of MS Bars and HA Steel ribbed strips constitute manufacturing, leading to the classification of final products under Chapter Heading 73.08. The appellant argued that these processes do not amount to manufacturing, citing various judicial decisions in support of their claim.

CENVAT Credit and Duty Payment Rates:
The appellant claimed that they took CENVAT credit on duty paid MS Bars/Strips and paid duty at different rates, 16% ad valorem till February 2004 and 8% ad valorem from March to June 2004. They contended that the processes carried out did not amount to manufacture, and hence, they should not be liable to pay any duty.

Legal Interpretation of Processes as Manufacture:
The Tribunal referred to a previous judgment in a similar matter, where it was held that processes like cutting and drilling do not amount to manufacture. The Tribunal reiterated that the processes undertaken by the appellant did not result in a new manufacturing process, as the basic nature of the raw materials remained unchanged.

Applicability of Chapter Headings and Liability of Central Excise Duty:
The Revenue argued that the processes carried out would classify the final products under Chapter 73, while the appellant contended that the products should remain under Chapter 72. The Tribunal upheld the appellant's argument, stating that the processes did not amount to manufacture during the relevant period.

Bar on Demands under the Law of Limitation:
The appellant also raised the issue of demands being barred under the law of limitation, which the Commissioner did not address. However, the Tribunal did not find it necessary to delve into this aspect as the main issue of manufacturing processes and classification was resolved in favor of the appellant.

Conclusion:
The Tribunal held that the processes of cutting, drilling, and galvanizing undertaken by the appellant did not amount to manufacture, and therefore, the classification of final products under Chapter 73 was incorrect. The impugned order was set aside, and the appeal was allowed with consequential reliefs. The judgment emphasized the distinction between processes that constitute manufacturing and those that do not, providing clarity on the classification and liability of Central Excise duty based on the nature of the processes involved.