2018 (6) TMI 313 - AT - Central Excise

Manufacture - applicability of Chapter Note-6 of Section XVI - appellant after procurement of Online UPSS, used to test Online UPSS and supplied the same to the customers to whom batteries were separately supplied and assembled to Online UPSS at the premises of Customers - The activity appeared to Revenue to have been covered by Section Note-6 of Section XVI of Central Excise Tariff Act, 1985. Held that - The investigation at the end of M/s RPS Industries, New Delhi, M/s Integrated Power Control, New Delhi & M/s Emerson Network Power (India) Pvt. Ltd., Thane did not prove that goods in question, that is Online UPSS supplied by the appellant were incomplete or unfinished. In fact, they were complete & finished goods on which duty was paid - Revenue has not brought on record any evidence to establish that at the end of said manufacturers of Online UPS the assessment was done by resorting to general Rule of interpretation of tariff particularly Rule 2(a) which has provided that the reference to article incomplete or unfinished should be treated as reference to finished and complete article if the article is having essential character of complete or finished article.Revenue has not brought on record any evidence to establish that at the end of said manufacturers of Online UPS the assessment was done by resorting to general Rule of interpretation of tariff particularly Rule 2(a) which has provided that the reference to article incomplete or unfinished should be treated as reference to finished and complete article if the article is having essential character of complete or finished article. Since the goods were complete when they were received by M/s NPS Powers Industries, the question of application on Chapter Note-6 of Section XVI does not arise - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Section Note-6 of Section XVI of Central Excise Tariff Act, 1985.
2. Application of Circular No.583/20/2001-CE dated 20th August, 2001.
3. Confiscation of goods and imposition of penalty under Rule 25 of Central Excise Rule, 2002.

Analysis:

Issue 1: Interpretation of Section Note-6 of Section XVI of Central Excise Tariff Act, 1985
The case involved appeals arising from an Order-in-Original passed by the Commissioner of Central Excise & Service Tax, Lucknow, regarding the manufacture of Online and Offline Uninterrupted Power Supply Systems (UPSS). The Revenue contended that the UPSS procured by the appellant were incomplete under Section Note-6 of Section XVI of the Central Excise Tariff Act, 1985. The Commissioner confirmed the demand for Central Excise duty, imposed penalties, and ordered confiscation of goods. However, the Tribunal found that the investigation did not prove the goods were incomplete or unfinished. As the goods were complete and finished when received by the appellant, the application of Section Note-6 was deemed unnecessary. The Tribunal ruled in favor of the appellant, setting aside the Order-in-Original.

Issue 2: Application of Circular No.583/20/2001-CE dated 20th August, 2001
The appellant argued that the transaction was not covered by Section Note-6 but by Circular No.583/20/2001-CE dated 20th August, 2001, issued by the Central Board of Excise & Customs. The Circular clarified that placing goods in a kit does not amount to manufacture if there is no change in the character or use of the articles. The appellant contended that the joining of Online UPSS and batteries at the customer's end did not constitute manufacture. The Tribunal agreed with this interpretation, stating that the goods were covered by the Circular and were not subject to the Section Note-6 provisions.

Issue 3: Confiscation of goods and penalty under Rule 25 of Central Excise Rule, 2002
The Revenue argued for the imposition of penalties under Rule 25 of the Central Excise Rule, 2002, due to the confiscation of goods. However, the Tribunal rejected this argument, as it found no evidence that the goods were incomplete or unfinished. As a result, the Tribunal set aside the Order-in-Original, allowing the appeal filed by the appellant and rejecting the appeal filed by the Revenue. The appellant was entitled to consequential relief as per the law.

In conclusion, the Tribunal's decision revolved around the interpretation of Section Note-6, the application of Circular No.583/20/2001-CE, and the legality of the confiscation of goods and imposition of penalties. The judgment favored the appellant, emphasizing that the goods were complete and finished, thus not falling under the provisions of Section Note-6, and were covered by the Circular instead.