2017 (9) TMI 910 - AT - Central Excise

Manufacture - conversion of aluminium/copper wire into transformer coil - Held that - the said issue in the assessee s own case Sub Divisional Officer Punjab State Electricity Board Versus CCE, Jalandhar 2013 (5) TMI 345 - CESTAT NEW DELHI , where this Tribunal has held that the activity undertaken by the assessee does not amount to manufacture, therefore, no duty is payable by the assessee - the process/activity undertaken by the assessee does not amount to manufacture - demand not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Manufacture of LT/HT coils, Duty liability, Valuation under Rule 8 and 11 of Valuation Rules, Cenvat credit, Penalty imposition

Manufacture of LT/HT coils:
The case involved the manufacturing of LT/HT coils falling under a specific chapter sub-heading of the Central Excise Tariff Act. The issue was whether the conversion of aluminum/copper wire into transformer coils constituted "manufacture" as per the Central Excise Act. The adjudicating authority in one show cause notice held that such conversion did not amount to manufacture, while in another notice, it was deemed as manufacture. The Commissioner (Appeals) later determined that LT/HT coils met the criteria of manufacture and marketability, making them liable for duty.

Duty liability:
Two show cause notices were issued to the assessee demanding duty payment for the LT/HT coils cleared from the factory to the Transformer Repair Division. The duty demands were contested, with one notice being dropped by the adjudicating authority, and the other confirmed with interest and penalty. The Revenue and the assessee both appealed the decision, with the Commissioner (Appeals) eventually ruling in favor of the department, holding that duty was applicable on the LT/HT coils.

Valuation under Rule 8 and 11 of Valuation Rules:
The valuation of LT/HT coils was a crucial aspect of the case, with the Commissioner (Appeals) determining the valuation under Rule 8 and Rule 11 of the Valuation Rules 2000. This valuation methodology was challenged by the assessee, leading to further appeals and legal proceedings.

Cenvat credit:
The benefit of Cenvat credit on inputs used in the manufacture of LT/HT coils was a significant point of contention. The Commissioner (Appeals) allowed the Cenvat credit benefit for the inputs used, which was challenged by the Revenue in their appeal against the decision.

Penalty imposition:
The imposition of penalties against the appellant in relation to one of the show cause notices was a matter of dispute. The Commissioner (Appeals) dropped the penalty, which led to the Revenue appealing against this decision. The issue of penalty imposition was intertwined with the broader question of duty liability and the manufacturing classification of LT/HT coils.

In the final judgment, the Appellate Tribunal referred to a previous decision in the assessee's own case, where it was held that the activity of converting aluminum/copper wire into transformer coils did not amount to manufacture. Relying on this precedent, the Tribunal concluded that the process undertaken by the assessee did not constitute manufacture, thus setting aside the duty demands. The appeals filed by the assessee were allowed, while those filed by the Revenue were dismissed for lacking merit.