2017 (12) TMI 223 - AT - Central Excise

Manufacture - process amounting to manufacture or not? - appellants were manufacturing and clearing the complete electronic weighbridges comprising digitizer, load cells, girders of specific size & end use, ground plates and C.I.plates of specific size & end use, joists of specific size & end use, platform of specific size and end use, from their factory premises and were clearing the same by showing the description as Fully Electronics Weighbridge or steel structure or load cells or Batteries or UPS or Digitizer etc - appellants were procuring the orders for complete weighbridge and clearing the same in unassembled/ disassembled condition. Held that - Some parts are manufactured by the appellants, some parts are imported and some parts are taken to site for erection and commissioning of the same in terms of the order placed upon the appellants by different customers. Moreover, some activities namely, cutting, punching, welding drilling and bending are undertaken by the job worker on steel items - the activity of cutting, drilling, punching and welding of channels and angles does not amount to manufacture. The electronic weighbridge cannot be treated as goods which is capable of being brought to the market as bought and sold as such, therefore, the appellants are not liable to pay duty on weighbridges as whole - the appellants are paying duty on parts and activity of erection and commissioning at site of the buyer undertaken by the job worker therefore, we hold that the appellants are not manufacturing complete weighbridge. The issue has been decided in the case of M/s. Ashbee Systems Pvt. Limited Shri Ashish Bhutani, Director Versus Commissioner of Central Excise & S.T., Delhi 2017 (3) TMI 1131 - CESTAT NEW DELHI , where it was held that the appellants are paying duty on the parts cleared by them and are doing erection and commissioning at the site of the buyer. Therefore, appellants are not liable to pay duty on complete weigh bridge. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Whether the activities of cutting, punching, welding, drilling, and bending of steel items amount to manufacture.
2. Whether the value of bought-out items should be included in the assessable value.
3. Applicability of Rule 2(a) of the Interpretative Rules to the case.
4. Imposition of penalty on the appellant for alleged suppression of facts.

Detailed Analysis:

1. Whether the activities of cutting, punching, welding, drilling, and bending of steel items amount to manufacture:
The appellant argued that the activities performed on steel items by job workers do not amount to manufacture. They relied on various judicial precedents, including decisions in Madhya Pradesh Power Transmission Co. Ltd. Vs. CCE, Bhopal and Elecon Engineering Co. Ltd. Vs. CCE, which held that such activities do not transform the subject goods into a new and different product with a distinct name, character, and use. The Tribunal agreed with the appellant, stating that the process does not amount to manufacture as per the definition in Section 2(f) of the Central Excise Act, 1944. The Tribunal further referenced the case of Jyoti Structures Ltd. Vs. CCE, Nashik, which supported the view that mere cutting, punching, drilling, and welding do not result in a new product. Therefore, the Tribunal concluded that these activities do not amount to manufacture.

2. Whether the value of bought-out items should be included in the assessable value:
The appellant contended that the value of bought-out items, such as load cells, should not be included in the assessable value as these items were supplied in the same form as imported without any processing. The Tribunal supported this argument, noting that no duty can be demanded on the value of load cells supplied to the buyers since no manufacturing activity was performed on them by the appellant.

3. Applicability of Rule 2(a) of the Interpretative Rules to the case:
The appellant argued that Rule 2(a) of the Interpretative Rules, which deals with goods cleared in CKD (Completely Knocked Down) or SKD (Semi Knocked Down) condition, was not applicable as the weighbridges were not complete or finished articles when cleared from the factory. The Tribunal found merit in this argument, stating that the weighbridges came into existence only at the site in an immovable form after assembly and construction activities. Hence, the Tribunal held that Rule 2(a) was not applicable in this case.

4. Imposition of penalty on the appellant for alleged suppression of facts:
The appellant argued against the imposition of a penalty, asserting that they had not suppressed any facts and had informed the department about their non-excisable products. The Tribunal agreed with the appellant, noting that the appellant had written a letter dated 15.02.2005 to the department stating that their products were not excisable. The Tribunal referenced the case of Savira Industries Vs. CCE, which supported the appellant's contention that no penalty should be imposed in the absence of suppression of facts.

Conclusion:
The Tribunal concluded that the activities of cutting, drilling, punching, and welding do not amount to manufacture. It also held that the value of bought-out items should not be included in the assessable value, and Rule 2(a) of the Interpretative Rules was not applicable. Furthermore, the Tribunal found no grounds for imposing a penalty on the appellant. Consequently, the impugned demands were set aside, and the appeal was allowed.

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