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2017 (10) TMI 1181 - AT - Central ExciseArea based exemption - Backward area - N/N. 56/2002-CE dated 14.11.2002 - Revenue is of the view that the appellant is not entitled for the benefit of notification, on the grounds that the process of making refined lead ingots and lead alloys, does not amount to manufacture - denial of CENVAT credit - whether the activity undertaken by M/s. GM amounts to manufacture and M/s. GMI is not liable to pay duty? Held that - expression manufacture under Section 2(f) was initially not correctly interpreted as per CBEC letter F.No. 4/3/2006 dated 16.06.2006 wherein it has been clarified that a number of departmental and private publications of Central Excise Act, 1944, published from time to time after 1986, contain(ed) an extra word andat the end of Section 2(f)(i) and before Section 2(f) (ii). The Section 2(f) reads as - manufacture includes any process, Incidental or ancillary to the completion of a manufactured product, which means that if the goods have been manufactured and any activity is done thereon for completion of the activity for further use, it shall amount to manufacture - A similar issue has been examined by this Tribunal in the Jindal Stainless Steelway Limited 2014 (9) TMI 658 - CESTAT MUMBAI wherein the appellant was engaged in cutting and slitting of coils. In addition to that they have carried out the slitting into desirable width as per the customersrequirement, larger weight coils are cut into smaller weight as per the customers requirement, that the coils are coated and layered with plastic for improving drawability besides applying inter-leaving paper for protection of material so as to be fit for end use application. The said activity was examined by this Tribunal, as defined under Section 2(f) wherein the process incidental or ancillary, was held to amounts to manufacture. Admittedly, in this case, M/s. GM is engaged in the activity of removing impurities from unrefined lead ingots for making lead alloy and thereafter alloy ingots. The refined lead has been recognised in Chapter 78 of Central Excise Tariff Act, 1985 - it is clear that refined lead means the metal weight at least 99.9% of lead and with some other antimony, as prescribed in the Chapter heading note. Therefore, to classify under Chapter 78, first it should be refined to the extent of 99.9% of lead. The Chapter 78 of CETA, itself recognise a separate new product of 99.9% of refined lead. Whether there is a violation of Article 14 of the Constitution of India, or not? - Held that - M/s. GM is located in the State of Jammu Kashmir and working under Notification No. 56/2002-CE dated 14.11.2002 wherein the duty paid through PLA is entitled as credit to M/s. GM and to denial of credit to M/s. GM has resulted in discrimination when compared to other manufacturers of the same goods by same process. Moreover, in their own unit, located in Gandhidham (Gujarat) the benefit is extended. In the light of the above observation, we hold that there should be uniformity in the stand taken by the Revenue and there should be no discrimination in the case in hand and the other cases. In view of the fact that the Revenue itself has admitted that activity undertaken by the appellant amounts to manufacture, therefore, we hold that activity undertaken by M/s. GM cannot be discriminated. Whether the appellant has been treated as manufacturer or not, in terms of exemption notification under Customs N/N. 96/2009-Cus - Held that - there is a process of manufacture when making refined lead from unrefined lead even as per the Customs authorities, read with the Import Export Policy, the FTP requires to bring into existence a new product having a distinct name, character and use, basis which the advance licences were granted to M/s. GM. Therefore, it is clear that even from this evidence, the process of making the refined lead and lead alloy ingots amounts to manufacture. Therefore, we hold that the process undertaken by M/s. GM amounts to manufacture in terms of exemption notification under Customs Notification No. 96/2009-Cus. Whether the ld. Adjudicating Authority is right to drop the demand on account of Cenvat credit utilised for payment of duty or not? - Held that - a similar issue came up before the Hon'ble High Court of Bombay in the case of Ajinkya Enterprises 2012 (7) TMI 141 - BOMBAY HIGH COURT wherein the Hon'ble High Court has held that in case of activity does not amount to manufacture, the payment of duty shall amount of reversal of Cenvat credit. Therefore, the ld. Commissioner has rightly allowed the claim of Cenvat credit to M/s. GM. Accordingly, the appeal filed by the Revenue is dismissed. Whether M/s. GMI is entitled for the benefit of exemption Notification No. 214/86-CE or not? - Held that - in terms of Notification No. 214/86, the principal manufacturer has to file an undertaking before the jurisdictional Central Excise authority of job works that the principal manufacturer shall pay the duty on the manufactured goods. Admittedly, the said undertaking has been filed by M/s. GM before the authorities below. In that circumstance, there is no fault of the appellant and the benefit of Notification No. 214/86 cannot be denied. Appeal dismissed - decided against Revenue.
Issues Involved:
1. Whether the activity undertaken by M/s. GM amounts to manufacture or not. 2. Whether the different treatment of similar activities by other manufacturers violates Article 14 of the Constitution of India. 3. Whether M/s. GM has been treated as a manufacturer under Customs Notification No. 96/2009-Cus. 4. Whether the adjudicating authority was correct in dropping the demand on account of Cenvat credit utilized for payment of duty. 5. Whether M/s. GMI is entitled to the benefit of exemption Notification No. 214/86-CE. 6. Whether Notification No. 56/2002-CE can be granted to M/s. GMI if Notification No. 214/86-CE is not applicable. Detailed Analysis: 1. Whether the activity undertaken by M/s. GM amounts to manufacture or not: The Tribunal examined the definition of "manufacture" under Section 2(f) of the Central Excise Act, 1944, which includes processes incidental or ancillary to the completion of a manufactured product. The Tribunal noted that M/s. GM's process involves converting unrefined lead ingots into refined lead ingots by removing impurities and then making lead alloys. This process results in a new and distinct product with a different name, character, and use, which is commercially recognized. The Tribunal referenced various case laws, including *Brakes India Ltd.* and *Mamta Surgical Cotton Industries*, to support the view that such a transformation amounts to manufacture. It was concluded that M/s. GM's activities meet the criteria for manufacture. 2. Whether the different treatment of similar activities by other manufacturers violates Article 14 of the Constitution of India: The Tribunal observed that similar activities by other manufacturers across India, including M/s. GM's own unit in Gandhidham, Gujarat, have been treated as manufacturing. Reports from various Commissionerates confirmed that identical processes were recognized as manufacturing. The Tribunal cited the Supreme Court's decisions in *Damodar J. Malapani* and *Unipatch Rubber Limited*, emphasizing that there should be uniformity in the application of the law. The Tribunal held that treating M/s. GM's activities differently would violate Article 14 of the Constitution, which ensures equality before the law. 3. Whether M/s. GM has been treated as a manufacturer under Customs Notification No. 96/2009-Cus: The Tribunal found that M/s. GM imported unrefined lead, processed it into refined lead and alloy ingots, and exported the finished products while availing benefits under Customs Notification No. 96/2009-Cus. This recognition by Customs authorities, along with the Import Export Policy, indicated that the process of making refined lead from unrefined lead amounts to manufacture. Thus, M/s. GM was treated as a manufacturer under the said notification. 4. Whether the adjudicating authority was correct in dropping the demand on account of Cenvat credit utilized for payment of duty: The Tribunal upheld the adjudicating authority's decision to drop the demand related to Cenvat credit. It referenced the Bombay High Court's decision in *Ajinkya Enterprises*, which held that payment of duty, even if the process does not amount to manufacture, amounts to the reversal of Cenvat credit. Therefore, the Tribunal found no fault in allowing M/s. GM to utilize Cenvat credit for duty payment. 5. Whether M/s. GMI is entitled to the benefit of exemption Notification No. 214/86-CE: The Tribunal noted that M/s. GM, the principal manufacturer, had filed the required undertaking under Notification No. 214/86-CE, committing to pay duty on the manufactured goods. This compliance entitled M/s. GMI to the benefits of the notification. The Tribunal referenced similar cases, such as *Moon Chemicals*, to support this conclusion. Consequently, M/s. GMI was found eligible for the exemption. 6. Whether Notification No. 56/2002-CE can be granted to M/s. GMI if Notification No. 214/86-CE is not applicable: Since the Tribunal concluded that M/s. GMI is entitled to the benefits of Notification No. 214/86-CE, it did not need to address the applicability of Notification No. 56/2002-CE to M/s. GMI. Conclusion: (i) The activity undertaken by M/s. GM amounts to manufacture. Hence, the demand of duty against M/s. GM is not sustainable, and the appeals filed by M/s. GM and M/s. GMI are allowed. (ii) The appeal filed by Revenue is dismissed.
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