2016 (9) TMI 426 - AT - Central Excise

Deemed manufacture - marketability - crude items processed out of the blanks - goods not mere process of gear teeth cutting on machined blanks sent by the customer which are returned to them after above operation - items like gears, pinions, housing etc. were cleared in crude form and major operation like heat treatment, slotting, broading, grinding, lapping etc. were carried out by the customers and were cleared as finished article - Held that - the samples produced by the appellants are finished products which only requires few further operations at the hands of the appellant s customer. The products which are manufactured by the appellant from raw material/ blanks can be termed as finished product which needs only further processing. Therefore, on merits section Note 6 to Section XVI of the Central Excise Tariff Act will directly apply. Revenue raised demand by issuing two different show-cause notices. Show-cause notice dated 28.05.1992 is issued for the period 10.12.1991 to 14.01.1992. It is found that this show-cause notice is within the period of limitation and demands as raised in the said show-cause notice are correctly held to be payable by the appellant and we do not see any reason for interfering with such an order. As regards show-cause notice dated 29.09.1993, it is found that this show-cause notice is issued by invoking the extended period of time and demand is for March 1989 to November 1991. In our considered view, this demand which has been worked out by invoking the extended period is unsustainable, inasmuch prior to 1986 when new tariff was introduced, Tribunal had held that the products which are manufactured by the appellant from the same blanks and the machinery used are non-excisable could have created a bonafide impression in the mind of the appellant subsequent to the new tariff act, coming into existence that their products are not excisable. This our view is fortified by the fact the lower authorities have not disputed the fact that the appellant manufactured the same items with the same process, as was done by him prior to 1986. Therefore, the demands raised by the show-cause notice dated 29.09.1993 is confirmed by the impugned order. - Appeal disposed of

Summary

Issues:
Demand of central excise duty on goods processed by the appellant, applicability of Central Excise Tariff Act 1985, limitation on show-cause notice for duty demand.

Analysis:
The case revolves around the demand of central excise duty on goods processed by the appellant, which were claimed to be not marketable products. The appellant argued that the items processed by them were not complete or finished products, relying on certificates from customers to support their claim. The appellant contended that the process carried out did not result in distinct and marketable goods, as required by the Central Excise Tariff Act 1985. Additionally, they raised the issue of limitation on the show-cause notice dated 29.09.1993, arguing that it was hit by the six-month limitation period and there was no suppression or misstatement from their end.

On the other hand, the Revenue asserted that the products processed by the appellant, although semi-finished, had attained the status of final products, making them liable for duty. They argued that the demand was correctly calculated for the entire period due to suppression of material facts. The Departmental Representative highlighted Section Note 6 to Section XVI and emphasized that the products, though unfinished, were considered final products, thus attracting duty liability.

After considering the submissions and examining the products produced by the appellant, the Tribunal found that the samples presented were finished products requiring minimal processing by the customer. The Tribunal concluded that the appellant's products fell under the Central Excise Tariff Act and were deemed finished goods, necessitating duty payment after eligible deductions. Regarding the show-cause notices, the Tribunal upheld the demand raised in the notice dated 28.05.1992, as it was within the limitation period. However, the demand from the notice dated 29.09.1993, covering the period before 1986, was deemed unsustainable due to the appellant's reasonable belief that their products were non-excisable based on previous Tribunal decisions. Consequently, the demand from the latter notice was confirmed by the impugned order.

In conclusion, the appeal was disposed of with the Tribunal upholding the duty demand on the appellant's processed goods under the Central Excise Tariff Act and addressing the issue of limitation on the show-cause notices, confirming one and rejecting the other based on the circumstances surrounding the appellant's belief regarding the excisability of their products.