2017 (8) TMI 781 - AT - Central Excise

Manufacture - process of kitting various sub assemblies were grouped into a kit and the kit also including certain components which were procured indigenously - It appeared to Revenue that such activity of kitting was assembly of machines by putting together various components to bring into a new machine and amounts to manufacture by invoking provision under Section Note 6 of Section XVI of Tariff Act - Held that - the requirement of facts for invocation of said Note are that at the beginning the goods should have essential character and they should be incomplete or unfinished and if any process is undertaken to make them complete and finished than such process amounts to manufacture - In the present SCN, which components are having essential characters and in which aspect they are incomplete or unfinished and which activities were undertaken to make them complete and finished are totally absent. Therefore, we do not find that the facts of the case justify invocation of provision of said Section Note 6 to Section XVI of Tariff Act, 1985 - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Allegations of manufacture by invoking Section Note 6 of Section XVI of Tariff Act.
2. Refurbishing activity at Jolly Godown and whether it amounts to manufacture.

Issue 1: Allegations of manufacture by invoking Section Note 6 of Section XVI of Tariff Act

The case involved appeals arising from a common Order-in-Original passed by the Commissioner of Central Excise Meerut-II. The appellant, M/s Xerox India Ltd., was engaged in manufacturing photocopiers and trading digital multifunctional printers. The show cause notice alleged that the appellant imported various components, performed a process called Kitting, and assembled machines, which was considered manufacturing under Section Note 6 of Section XVI of the Central Excise Tariff. The show cause notice also raised issues regarding refurbishing activities at Jolly Godown. The Original Authority confirmed demands totaling over ?15 crore and imposed penalties. The appellants contended that their activities did not amount to manufacture as per the relevant provisions. The Tribunal dismissed the appeal initially, leading to further appeals.

Issue 2: Refurbishing activity at Jolly Godown and whether it amounts to manufacture

The learned counsel for the appellant argued that the refurbishing activity at Jolly Godown did not amount to manufacture, citing precedents such as the case of Metro Appliance Ltd. where a similar activity was not considered manufacturing by the Hon'ble Allahabad High Court. The learned AR supported the Order-in-Original. After considering the contentions and records, the Tribunal found that the allegations under Section Note 6 were not substantiated as essential facts justifying the invocation of the provision were absent. Therefore, the demands related to this allegation were set aside. Regarding the refurbishing activity at Jolly Godown, the Tribunal applied the ruling of the Hon'ble Allahabad High Court in the Metro Appliance Ltd. case and set aside the demand related to this activity as well. Consequently, the penalties were also deemed unsustainable. The Tribunal concluded that the impugned Order-in-Original was not sustainable and allowed the appeals, granting the appellants consequential relief as per law.

This detailed analysis of the judgment addresses the issues raised in the case comprehensively, covering the legal arguments, precedents, and the Tribunal's final decision on each issue.