2017 (9) TMI 449 - AT - Central Excise

Manufacture - After receiving the items in their factory premises at Noida. They were repacking the sets, and putting a sticker of running SI. No., sticker bearing imprint Manufactured & Marketed by MIT Corporation, Parwanoo - It appeared to Revenue that the process of testing, labeling/relabeling and repacking etc. of the product amounts to deemed manufacture in terms of Section 2(f) (iii) of Central Excise Act, 1944 - Held that - there is no evidence that the VCD/DVD players were imported by the respondent MIT Corporation, directly at Noida. There is no evidence that the goods transferred from Parwanoo, to Noida were not manufactured at Parwanoo. The allegation in the show cause notice that some goods were found in testing room where some stickers were not fixed is not sufficient evidence to establish that manufacturing was carried out on the goods seized at Noida, especially when there is contrary report of the investigation carried out at Parwanoo unit. The Department has failed to put forth even a single bill of entry to sustain its claim that there was direct import at Noida. Accordingly, the allegations leveled in the SCN are not proved against the respondents. The evidence on record have been relied upon selectively in view of the statement of Shri Lalwani which is relied upon, who categorically stated that no activity other than inspection is carried out at Noida. It has to be treated as valid evidence in favor of the respondent as evidence in the whole has to be read and not relied on in part, which is suitable to Revenue. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Whether the process undertaken by the respondent amounts to deemed manufacture under Section 2(f)(iii) of the Central Excise Act, 1944.
2. Whether the goods were rightly confiscated and penalties imposed by the Additional Commissioner.
3. Whether the respondent was entitled to SSI exemption.
4. Whether the goods were imported directly at Noida or transferred from Parwanoo.

Detailed Analysis:

1. Deemed Manufacture:
The primary issue was whether the activities of testing, labeling/relabeling, and repacking undertaken by the respondent amounted to deemed manufacture under Section 2(f)(iii) of the Central Excise Act, 1944. The Revenue argued that these activities constituted deemed manufacture, necessitating registration and payment of duty. The respondent contended that the activities were merely quality control and did not amount to manufacture. The Tribunal found no evidence that the goods were manufactured at Noida and noted that similar activities at the respondent's Delhi unit were not treated as manufacturing. Thus, it was held that the activities did not constitute deemed manufacture.

2. Confiscation and Penalties:
The Additional Commissioner had ordered the confiscation of goods valued at ?31,49,742/- and imposed penalties on the respondent and its Vice-President. The Tribunal found that the confiscation and penalties were based on assumptions and lacked substantial evidence. It was observed that the goods were transferred from Parwanoo and not imported directly at Noida. The Tribunal upheld the Commissioner (Appeals) decision to set aside the confiscation and penalties, stating that the allegations in the show cause notice were not proven.

3. SSI Exemption:
The respondent argued that even if the activities were considered as manufacture, they were entitled to SSI exemption as their turnover was within the SSI limit. The Tribunal did not delve deeply into this issue, as it found that the activities did not amount to manufacture. However, it noted that the adjudicating authority's conclusion that the goods were exported from Noida was without basis.

4. Import at Noida vs. Transfer from Parwanoo:
The Revenue claimed that the goods were imported directly at Noida, while the respondent asserted that they were transferred from Parwanoo. The Tribunal found no evidence supporting the Revenue's claim of direct import at Noida. It was noted that the respondent had provided bills of entry for goods imported at Parwanoo, and the investigation at Parwanoo confirmed that the goods were manufactured there. The Tribunal concluded that the goods were indeed transferred from Parwanoo and not imported directly at Noida.

Conclusion:
The Tribunal dismissed the Revenue's appeal, confirming the Commissioner (Appeals) order. It was held that the activities undertaken by the respondent did not amount to deemed manufacture, the confiscation and penalties were unjustified, and there was no evidence of direct import at Noida. The respondent was entitled to consequential benefits, and the Tribunal appreciated the assistance provided by the amicus curiae.