2018 (3) TMI 343 - AT - Central Excise

Manufacture - goods processed/manufactured by the appellants out of the free issue of input materials received from their customers and galvanisation of the manufactured goods received by them from their customers and after the required processes the goods were returned to the customers form whom the input goods were received - Held that - identical issue decided in the case of M/s Krishna Saa Fabs Pvt. Ltd. Versus CC & CE, Tirupati 2016 (7) TMI 771 - CESTAT HYDERABAD , where it was held that process undertaken by the respondents do not amount to manufacture as the MS rods, plates, angles etc. remain the same even after the process have been carried out. Therefore, there is no new manufacturing process involved. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Whether demand of excise duty on goods processed/manufactured from free issue of input materials is sustainable.
2. Whether the Notice is barred by limitation.
3. Whether the appellant properly availed benefits of Notifications 8/2002-CE, dt 1.3.2002 and 9/2003-CE dt. 1.3.2003, and if CENVAT credit was taken irregularly.
4. Whether penalties imposed on the appellant company and Managing Director are sustainable.

Analysis:
1. The first issue revolves around excise duty demand on goods processed from free issue input materials. The Tribunal considered a similar case where it was held that processes like cutting, sizing, drilling, and galvanizing do not amount to manufacture. The Tribunal referred to a previous judgment stating that converting raw materials to bring about a distinct commodity constitutes manufacture. As the process undertaken by the appellant did not involve a new manufacturing process, the demand of duty was deemed unsustainable for the material period.

2. Addressing the second issue of limitation, the Tribunal noted that the demand period was prior to the Chapter Note 5 amendment in Chapter 72, which deemed galvanization as manufacture. Since the process of galvanizing on the products in question was not considered manufacture during the relevant period, the impugned order was set aside, and the appeal was allowed with consequential reliefs.

3. The third issue pertained to the appellant's compliance with Notifications 8/2002-CE and 9/2003-CE. The Tribunal upheld the impugned order, stating that the appellant's activities did not amount to manufacture based on the precedent set in their own case. Consequently, the order was deemed correct and legal without any infirmity.

4. Lastly, the issue of penalties imposed on the appellant company and Managing Director was considered. Given the Tribunal's findings on the main issue of excise duty demand and non-manufacture activities, the penalties were also deemed unsustainable. The impugned order was upheld, and the appeals were rejected accordingly.