2017 (3) TMI 291 - AT - Central Excise

Manufacture - whether the activity of cutting, drilling, punching hole bending/welding amount to manufacture in terms of section 2 (f) of CEA, 1944 or not? - Held that - in the case of Mahindra & Mahindra Ltd. 2005 (11) TMI 103 - CESTAT, NEW DELHI it has been held that the activity of cutting,drilling, punching hole bending/welding amount to manufacture and liable to pay duty under heading 73.08 - the photographs of certain items which show that they have undertaken the activity of cutting, drilling, punching hole but in some cases, welding has also taken place. In that circumstance, the correct quantification of demand is not ascertainable, therefore, the matter needs examination at the end of the adjudicating authority - appeal allowed by way of remand.

Summary

Issues:
Whether the activity of cutting, drilling, punching holes, bending, and welding amounts to manufacture under the Central Excise Act, 1944.

Analysis:
The appellants fabricated various items for electric poles through cutting, drilling, bending, and welding. The department contended that these activities constituted manufacturing, citing a precedent involving Mahindra & Mahindra Ltd. The appellants argued that the processes did not create new marketable products, relying on various legal precedents, including a decision by the Hon'ble Apex Court. The Tribunal considered both arguments and examined relevant case laws.

The Tribunal noted that the Mahindra & Mahindra Ltd. decision held that cutting, drilling, and welding activities amounted to manufacture. However, the Tribunal also referenced a case involving Deepak Galvanising & Engg. Indus. Pvt. Ltd., where it was held that such processes did not constitute manufacturing as the basic materials remained unchanged. Another case involving Jyoti Structures Ltd. supported this view, and the High Court upheld the decision.

The Tribunal concluded that cutting and drilling alone did not amount to manufacture based on the Deepak Galvanising case. However, if welding was involved, the activity was deemed to be manufacturing, following the precedent set by Mahindra & Mahindra Ltd. The Tribunal remanded the case to the adjudicating authority for further quantification of demands based on these observations, ensuring a fair hearing for the appellants and recalculating cenvat credit accordingly.

In summary, the Tribunal clarified that cutting and drilling activities did not constitute manufacturing, as established by previous rulings. However, if welding was part of the process, it was considered manufacturing. The case was remanded for a re-evaluation of demands, providing the appellants with an opportunity to present their case and adjusting cenvat credit accordingly.