2017 (6) TMI 373 - AT - Central Excise

Manufacture - whether conversion of nonferrous metals into metal alloys would amount to manufacture in terms of the section 2(f) of the CEA 1944? - whether the goods viz. Nickel, lead and tin alloys made by the appellant were liable to Central excise duty during the disputed period? - Held that - similar question came up before the Hon ble Supreme Court in the case of Commissioner Central Excise Jaipur vs Mahavir Aluminum Ltd 2007 (5) TMI 2 - SUPREME COURT OF INDIA in which the Apex Court considered a question whether aluminum in ingots when converted into billets would amount to manufacture. Modvat credit of inputs and capital goods - SSI exemption - Held that - It is a settled position of law that the demand cannot be sustained unless all the relied upon documents have been furnished to the appellant to enable them to defend themselves fairly - wherever the relied upon documents have not been supplied to the appellant, the demand of excise duty is liable to be set-aside. Matter remanded to the original adjudicating authority who will recompute the demand after excluding the demands attributable to the documents whose copies have not been made available to the appellant - Appeal allowed by way of remand.

Summary

Issues:
1. Whether the goods manufactured by the appellant were liable to Central excise duty during the disputed period.
2. Whether the appellant is entitled to Modvat credit on inputs and capital goods.
3. Whether the appellant should be granted the benefit of small-scale industry exemption notification.

Analysis:

Issue 1:
The appellant contended that the conversion of metals into alloys did not amount to manufacture since both metals and alloys were classified under the same subheading. However, referencing the case of Commissioner Central Excise Jaipur Vs Mahavir Aluminum Ltd, the Supreme Court held that a mere change in physical form does not necessarily constitute manufacture. The Court emphasized that for a process to be considered manufacturing, it must result in the emergence of a new commercial commodity. Therefore, the conversion of metals into alloys was deemed as manufacturing, making the appellant liable to pay Central excise duty on the finished products.

Issue 2:
Regarding Modvat credit eligibility, the Court referred to the Apex Court's decision, stating that the appellant could claim Modvat benefits if found eligible. The adjudicating authority was directed to allow Modvat credits in the de novo proceedings, subject to fulfilling the necessary conditions and providing supporting documents. The appellant was granted an opportunity to present their claim for Modvat credit with proper documentation.

Issue 3:
The appellant also sought the benefit of small-scale industry exemption notification. The Court affirmed that if the appellant met the conditions specified in the notification, they would be entitled to the SSI exemption. The adjudicating authority was instructed to consider the appellant's eligibility for the SSI exemption and grant the benefit if the conditions were satisfied.

In conclusion, the Court upheld the charge of manufacture and remanded the case to the adjudicating authority for re-quantification of the demand. The authority was directed to exclude demands attributable to documents not provided to the appellant, allow Modvat credits, and consider granting the SSI exemption based on fulfillment of specified conditions.