2017 (7) TMI 55 - AT - Central Excise

Manufacture - appellants received flats and angles of iron and steel supplied by M/s ABB Ltd. After cutting to size the said flats and angles and drilling holes therein, the said products were joined by using nuts, bolts and washers before returning the same to the principal namely M/s ABB Ltd. - whether the said process amounts to manufacture or not? - Held that - The products, in question, as cleared by the appellants are specifically identifiable and classifiable under a tariff heading under Chapter 73. The raw materials are of general nature falling under Chapter 72. As such, we have no reason to interfere with the findings of the lower authorities, that the process amounts to manufacture - demand upheld. Extended period of limitation - Held that - when the raw materials are supplied by principal/buyer they have not paid Central Excise duty for claimed to have paid service tax. In such situation, the appellants had knowledge and applied different reasoning to follow different tax liabilities for the same processes - extended period rightly invoked. Appeal dismissed - decided against appellant.

Issues:
1. Liability to pay Central Excise duty on processes undertaken on iron and steel items received from the principal.
2. Determination of whether the processes amount to manufacture.
3. Applicability of Circular dated 05/01/1988 of the Board and the decision in CCE, Jaipur Vs. Man Structurals Ltd.
4. Discharge of Central Excise duty on similar processes when undertaken on own raw material.
5. Plea of limitation regarding the payment of Central Excise duty.

Analysis:

1. The appeal challenged an order where the appellants were held liable to pay Central Excise duty on processes conducted on iron and steel items received from the principal, M/s ABB Ltd. The processes involved cutting, drilling holes, and joining the items using nuts, bolts, and washers before returning them to the principal. The Revenue asserted the duty liability, leading to the confirmation of duty and imposition of a penalty by the Original Authority, which was upheld on appeal.

2. The main contention was whether the processes undertaken by the appellants constituted manufacturing. The appellant argued that the processes of cutting and making holes did not amount to manufacture, citing a Tribunal decision and the payment of service tax under "business auxiliary service" as evidence. However, the AR supported the lower authorities' findings, relying on a Circular and a Supreme Court decision to assert that the processes did amount to manufacture.

3. The Tribunal analyzed the processes undertaken by the appellants and concluded that the products resulting from these processes had different characteristics, were marketable under different names, and classifiable under a different heading. The Tribunal noted that the processes fell within the scope of Section 2(f) of the Central Excise Act, 1944, as the products fit the description under the relevant tariff heading.

4. Referring to a previous Tribunal case and a Supreme Court decision, the Tribunal emphasized that the products cleared by the appellants were identifiable and classifiable under a specific tariff heading, distinct from the raw materials. The Tribunal highlighted the inconsistency in the appellants' approach of discharging duty on similar processes based on whether the raw materials were their own or supplied by the principal.

5. The appellants raised a plea of limitation, arguing that they had paid Central Excise duty for the same processes when using their own raw materials but not when supplied by the principal. However, the Tribunal rejected this argument, stating that the appellants had knowledge of the differing tax liabilities and chose to apply different reasoning, leading to the demand for an extended period being upheld.

In conclusion, the Tribunal found no merit in the appeal and dismissed it based on the detailed analysis of the issues surrounding the liability to pay Central Excise duty on the processes undertaken on iron and steel items received from the principal.

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