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2018 (1) TMI 108 - AT - Central ExciseManufacture - Goods purchased are in bulk and sold in bulk - Classification of goods - BPL kit - whether classified under CETH 85371000 or otherwise? - Held that - Admittedly, the appellant-assessee cleared, at least, part of their sales in original bulk packing as procured by them from the market/manufacturers without any process undertaken by them. The invoice for the same is also referring to the items individually. When the procured electrical components are sold in original bulk packing without any process of fixing or mounting on any board, we find no justification at all to subject such clearances to central excise levy. Goods purchased are in bulk and sold in bulk; the appellant assessee did not undertake any process on such goods. The goods cleared by the appellant were generically called as BPL Kit. It is apparent that the method of clearance is mandated by the terms of agreement with their clients. There is no standard commercially identifiable item which is available for sale or purchase in the market. In other words, there is no BPL Kit commercially known and marketed. The clearances made by the appellant-assessee to the various clients as per their requirement are not any new manufactured product, commercially identifiable as BPL Kit. The Revenue did not produce any evidence or did not even assert that these are commercially known and marketed product. The electrical components retained their name, character and use and there is no new commercially identifiable product emerging in the present case. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Classification of BPL Kits under CETH 85371000. 2. Liability to Central Excise Duty. 3. Definition and scope of "manufacture" under Section 2(f) of the Central Excise Act, 1944. 4. Validity of extended period for demand and imposition of penalty. 5. Categorization and valuation of goods cleared by the appellant-assessee. Issue-wise Detailed Analysis: 1. Classification of BPL Kits under CETH 85371000: The Revenue argued that the BPL Kits should be classified under CETH 85371000, which pertains to boards, panels, and other bases equipped with electrical apparatus for control or distribution of electricity. The appellant-assessee contended that the items, even when mounted on boards, do not constitute a new product for electric control or distribution. The Tribunal found that the electrical components retained their identity and did not transform into a new product. Thus, the classification under CETH 85371000 was not justified. 2. Liability to Central Excise Duty: The Revenue demanded Central Excise Duty on the BPL Kits, asserting they were manufactured goods. The original authority dropped a significant portion of the demand but confirmed duty on certain clearances. The Tribunal held that the appellant-assessee did not undertake any process amounting to "manufacture" as defined under Section 2(f) of the Central Excise Act, 1944, and thus, the goods were not liable for Central Excise Duty. 3. Definition and Scope of "Manufacture" under Section 2(f) of the Central Excise Act, 1944: The Tribunal referred to various Supreme Court decisions to interpret "manufacture." It was emphasized that "manufacture" involves a process that results in a new and distinct article with a different name, character, or use. The Tribunal concluded that merely mounting electrical components on a board did not amount to "manufacture" as no new product emerged, and the components retained their original identity and use. 4. Validity of Extended Period for Demand and Imposition of Penalty: The appellant-assessee argued against the invocation of the extended period and imposition of penalties, claiming the issue was one of interpretation. The Tribunal agreed, noting that the appellant-assessee provided all necessary documents and there was no misrepresentation. Therefore, the extended period and penalties were not justified. 5. Categorization and Valuation of Goods Cleared by the Appellant-Assessee: The Tribunal examined the categorization of goods into different types based on how they were cleared (e.g., in bulk, mounted on boards). It found that the categorization was based on trade practices and documents maintained by the appellant-assessee. The Tribunal upheld the categorization and found no evidence of misrepresentation by the appellant-assessee. The Tribunal also noted that the goods were cleared in their original bulk packing without any process undertaken by the appellant-assessee, thus not attracting central excise levy. Conclusion: The Tribunal allowed the appeal by the appellant-assessee and dismissed the appeal by the Revenue, concluding that the appellant-assessee did not manufacture any dutiable item attracting central excise levy during the material time. The Tribunal upheld the original authority's order to the extent it dropped the demand against the appellant-assessee. Pronouncement: The judgment was pronounced in court on 28.12.2017.
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