2018 (6) TMI 242 - AT - Central Excise

Manufacture - assembly at site - tower clock - cannibalization - Activities of procurement from vendors, assembling, testing and installation of tower clocks for municipal and other organisations - Whether the activity amounts to manufacture - Principles of Natural Justice denied - Held that - the original adjudicating authority has relied upon an investigation report submitted by the Superintendent of Yeshwanthpur Range and an opportunity was not given to the appellants to put forth their defence. Even if it is assumed that such an investigation report has been prepared on the basis of the documents submitted by the appellants and in consultation with them thereof, the adjudicating authority could have given a copy of such report to the appellants, so that the appellants could have defended themselves against the conclusions drawn thereof in the investigation report- the investigation report being very critical to the conclusions of the adjudicating authority, an opportunity should have been given to the appellants and any denial of such opportunity is a clear violation of principles of natural justice. Whether the appellant s activities in the clock tower amounts to manufacture? - Held that - Tribunal in the case of Aska Equipments Pvt. Ltd. vs. Commissioner of Central Excise 2006 (6) TMI 27 - CESTAT, MUMBAI wherein it was held that demand raised on the assessee-traders involved in providing specifications relating to quality, etc., of lighting steel tower structures required to be manufactured by job workers was misdirected and therefore, unsustainable - demand set aside. The appeal succeeds on the issue of merits as well as on principles of natural justice - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the activities undertaken by the appellants amount to manufacture and whether they are liable to discharge Central Excise duty.
2. Whether the appellants were denied principles of natural justice by not being provided with the investigation report and an opportunity to defend themselves.
3. Whether the appellant's activities in the clock tower constitute manufacture.

Analysis:

1. The original adjudicating authority found that the appellants' activities of procurement, assembling, testing, and installation of tower clocks constituted manufacturing. They were held liable to pay Central Excise duty, education cess, interest, and a penalty. The appellate authority upheld this decision, leading to the appellants filing the present appeal.

2. The appellants argued that they were not provided with the investigation report or an opportunity to defend themselves, which violated principles of natural justice. The Tribunal agreed, emphasizing that the investigation report was critical to the decision, and the appellants should have been given a chance to respond. Citing previous judgments, the Tribunal held that denying such an opportunity amounted to a violation of natural justice.

3. Regarding whether the appellant's activities in the clock tower constituted manufacture, the appellants contended that they did not directly procure or supply parts of tower clocks. They placed orders on vendors who supplied directly to the customer's site for installation. The Tribunal, referring to previous cases, noted that each clock tower was a separate entity and could not be dismantled and moved without damage, supporting the appellant's argument. The Tribunal also cited a case where demands on traders providing specifications for manufacturing were deemed unsustainable, further strengthening the appellant's position.

In conclusion, the Tribunal ruled in favor of the appellants, finding merit in their arguments and acknowledging the violation of principles of natural justice. The appeal was allowed, and the decision was pronounced in open court on 29/05/2018.