2016 (8) TMI 891 - AT - Central Excise

Whether the duty paid copper tubes purchased from outside and subjected to various processes by the appellant would continue to be classified under 74.11 as copper tubes or pipes or whether it has undergone manufacture and would be classifiable under 8414.91 as parts of gas compressor - Held that - Copper tubes and pipes covered under 74.11, as commonly understood in trade parlance, would include tubes and pipes of various diameters which satisfy the note 1(h) to Chapter 74 which are generally sold in running length. Whereas in the case of appellant the pipes are cut to different dimension, subject to process of bending and also process such as grinding and smoothening would no longer be understood in trade parlance as simple tubes and pipes. These goods can only be used as parts of the equipment for which they were made. The above processes have transformed, the copper tubes into new products described as charging tubes, discharge tubes, second tubes etc. which are nothing but parts of gas compressors. These products have character, use and name which are distinctly different from the generic term of copper tubes. Therefore, the process amounts to manufacture as defined in Section 2(f) of the Central Excise Act, 1944. The assessee having declared fairly their view in the classification list filed before the proper officer, it was open to the Revenue to carry out verification and initiate proceedings for demand if necessary within the normal period of six months under Section 11A of the Central Excise Act. Keeping this in view, we find that the first show cause notice covering the period 27.02.1989 to 31.03.1993 involving demand of about ₹ 10.84 lakhs, issued on 16.02.1994 would be hit by limitation under Section 11A. However, the subsequent three notices would fall within the normal period of limitation and accordingly the demands of duty raised in these three notices are upheld. However, there is no justification to impose any penalty on the assessee and hence penalty imposed in the impugned order is set-aside. - Decided partly in favour of assessee

Summary

Issues:
Classification of goods under Central Excise Tariff - Whether processes undertaken amount to manufacture - Proper classification based on end use - Invocation of suppression and extended period under Section 11A for demanding duty.

Analysis:
1. The appeal challenges the order of the Commissioner dated 09.01.2009 regarding the classification of goods manufactured by the appellant under the Central Excise Tariff. The appellant, engaged in manufacturing gas compressor parts, initially filed a classification list in 1988 claiming classification under sub-heading 8414.91. Subsequently, a revised list in 1989 declared involvement in trading activity of copper tubes, which they cut and bent. The Revenue Officers viewed this process as manufacturing, leading to show cause notices and an order by the Collector classifying the products as copper tubes under heading 74.11. The matter was remanded to the Collector by CEGAT and eventually classified under 8414.91 by the Commissioner in 2009, with duty demands of around ?14 lakhs and a penalty imposed.

2. The main grounds of appeal include the contention that the processes on tubes did not amount to manufacture, citing Chapter Note 1(h) to Chapter 74, and challenging the classification based on end use. The appellant argued against invoking suppression and extended period under Section 11A, as they had declared their view on the processes in the classification list. The Revenue reiterated the Commissioner's findings in the impugned order.

3. The Tribunal deliberated on whether the processes conducted by the appellant transformed the duty paid copper tubes into parts of gas compressors, warranting classification under 8414.91. The processes involved cutting, bending, grinding, and smoothening of the tubes, tailored as per buyer requirements. The goods were sold to customers engaged in repair and reconditioning of thermatic sealed compressors, indicating a specific end-use.

4. The Tribunal observed that the processes altered the nature of the copper tubes, making them suitable only as parts of gas compressors, distinct from generic copper tubes. This transformation aligned with the definition of manufacture under Section 2(f) of the Central Excise Act, 1944. The appellant's declaration in the classification list that the processes did not amount to manufacture was considered, leading to a limitation on the first show cause notice under Section 11A.

5. While the first notice was time-barred, the subsequent notices fell within the limitation period. Thus, the demands in the latter notices were upheld, but the penalty imposed was set aside. The appeal was partly allowed, emphasizing the importance of declarations made by the assessee and the Revenue's responsibility to verify and act within the statutory period.

This detailed analysis highlights the classification dispute, the manufacturing processes, end-use considerations, and the legal implications of the appellant's declarations on duty demands and penalties under the Central Excise Act.