2019 (4) TMI 162 - AT - Central Excise

Change of Classification of goods - process amounting to manufacture or not - MRP based valuation u/s 4A - Held that - The fact which has not been disputed by the appellant that the appellant is doing packing, repacking and affixing MRP on the spare parts received after manufacturing by the suppliers. In terms of Section 2(f) (iii) of Central Excise Act, 1944, the activity undertaken by the appellant amounts to manufacture, when the activity undertaken by the appellant amounts to manufacture, therefore, after manufacturing the goods which emerge to be classified. Therefore, it is not the question of change of classification of the goods. In fact, when the activity undertaken by the assessee amounts to manufacture then the goods are to be classified correctly as per Third Schedule. Therefore, the adjudicating authority has correctly re-classified the goods. The appellants are themselves are manufacturers and their goods are to be valued in terms of Section 4A of the Act - appeal dismissed - decided against appellant.

Summary

Issues: Classification of spare parts under Central Excise Act, 1944.

Analysis:
The appellant, a spare parts division of a company, was involved in procuring spare parts of motorcycles in bulk, re-packaging them with the company's brand and logo, and selling them to dealers. A show cause notice was issued to classify the spare parts under a specific subheading of the Tariff Act due to the re-packing and labeling activities, which were considered as manufacturing under Section 2(f) (iii) of the Central Excise Act, 1944. The adjudication resulted in a demand for duty, interest, and penalties on the appellants, leading to the appeal.

The appellant argued that the classification of products should be determined by the officer in charge of the manufacturing unit and not by the recipient unit. They cited various decisions to support their contention. However, the Tribunal noted that the appellant's activities, such as packing, re-packing, and affixing MRP on spare parts, amounted to manufacturing under the Central Excise Act. Therefore, the correct classification of goods was essential post-manufacturing, irrespective of the initial classification.

Additionally, the Tribunal emphasized that the buyer, in this case, the appellant, was also a manufacturer, making the decisions cited by the appellant's counsel irrelevant to the current case. The argument that classification cannot be changed at the recipient end was dismissed since the recipient itself was considered a manufacturer under the Central Excise Act. Consequently, the Tribunal upheld the impugned order, stating that the appellants were manufacturers and their goods should be valued according to Section 4A of the Act, leading to the dismissal of the appeals filed by the appellants.