2016 (11) TMI 624 - AT - Central Excise

Levy of central excise duty - activities of assembling the various components of audio cassettes into CO cassettes on job charges - job work - audio cassettes without magnetic tape or ribbon (C-0 cassettes) - Held that - reliance placed on the decision of the case Collector of Central Excise, Mumbai Vs. Shemaroo Video Recording P. Ltd. 1999 (2) TMI 151 - CEGAT, NEW DELHI where it was held that assembly of video cassettes with magnetic tapes will not amount to manufacture - the various components received by the appellants were assembled by them manually assembly, the end product does not become an audio cassette as audio magnetic tapes either recorded or unrecorded. In other and even after it is not having words, the un-assembled components brought in by the appellants were cleared after assembly as C0 cassette. We find as such in such circumstances, there is no new product emerging satisfying the condition for manufacture. The department proposed classification differently in both the show cause notices whereas the Original Authority held that classification under CTH 852312, though the Board classified the components of audio cassettes under CTH 39.26. Further, we also note that valuation adopted is arbitrary and without any justification. The of principal supplier of components, who received back the assembled (C0) considered without any detailed examination - the duty demand against the appellant is held to be not sustainable - appeal allowed.

Summary

Issues Involved:
1. Liability of central excise duty on assembling audio cassette components.
2. Classification of assembled components under CTH 3926 or CTH 8523.12.
3. Valuation of assembled components.
4. Tax liability of the appellant as job workers.

Analysis:
1. The case involved determining the liability of the appellant for central excise duty on assembling various components of audio cassettes into C0 cassettes on job charges. The appellant argued that they were merely job workers assembling components without ownership, citing the Supreme Court's decision in Ujjagar Prints. The Tribunal noted that the assembled product did not constitute a functional audio cassette without a magnetic tape, referencing a similar case involving video cassettes. It was concluded that no new product emerged satisfying the condition for manufacture, leading to the appellant's non-tax liability.

2. The issue of classification under CTH 3926 or CTH 8523.12 was raised, as the department proposed different classifications in show cause notices. The Original Authority classified under CTH 8523.12, while the Board classified under CTH 3926. The Tribunal found the classification arbitrary and without justification, supporting the Board's classification of components of audio cassettes under CTH 3926. This inconsistency contributed to the unsustainability of the duty demand against the appellant.

3. The valuation of the assembled components was contested as arbitrary and without detailed examination. The Tribunal noted that the valuation adopted lacked justification, especially regarding the principal supplier of components who received back the assembled C0 cassettes. This lack of detailed examination further supported the decision to set aside the duty demand against the appellant.

4. Considering the appellant's role as job workers and the non-tax liability established, the Tribunal set aside the impugned order dated 19.02.2008, along with the proceedings related to confiscation of final products and raw materials. Both appeals were allowed in favor of the appellant, concluding that the duty demand was not sustainable due to the absence of a new product emerging from the assembly of components.

This detailed analysis covers the key issues addressed in the judgment, highlighting the legal reasoning and conclusions reached by the Tribunal in the case.