2019 (11) TMI 956 - HC - Customs

Process amounting to manufacture or not - Validity of N/N. 25/99-Cus., dated 28-2-1999 - import of parts of picture tubes for use in manufacture of Colour Picture Tubes at concessional rate of duty - Appellant received defective CPTs in addition to the material for manufacturing CPTs - It is the case of the appellant that since returned CPTs have been dismantled completely and converted into new CPTs, therefore, such activity amounts to manufacture - applicability of Rule 16 of the Central Excise Rules, 2002 - HELD THAT - As per rule 16 repair activity undertaken by the appellant did not amount to manufacture, and therefore, the goods used for repair of CPTs were not eligible for concessional rate of duty under notification No. 25/99-Cus., dated 28-2-1999 as that exemption is available only for such goods which were used for the manufacture of finished goods. In fact, as per the appellant s own case in Hotline CPT Ltd. V. Commissioner of Central Excise, Indore 2004 (5) TMI 166 - CESTAT, NEW DELHI , CESTAT in paras 7 and 8 has held that the activity of repair of CPTs did not amount to manufacture. We have also perused the letter dated 23-5-2001 and as has been contended by learned counsel for the respondent, it nowhere gives information to the revenue as to using of goods imported on concessional rate of duty for such repair work. In fact, such concessional rate of duty was applicable on imported parts only for the purpose of manufacture of excisable goods - Repair activity though may be given any shape or form as mentioned by learned counsel for the appellant including complete dismantling, will not amount to manufacture. The substantial question of law so framed is decided against the appellant and there is no apparent error in the impugned orders - appeal dismissed.

Summary

Issues Involved:

1. Whether the Tribunal committed an error of law in declining to grant the benefit of exemption under notification dated 28-2-1999.
2. Whether the appellant's activity of repairing defective Colour Picture Tubes (CPTs) amounts to manufacturing.
3. Whether the demand raised by the department is time-barred.
4. Whether the appellant informed the department about the repair work using imported parts at concessional rates.

Issue-wise Detailed Analysis:

1. Error of Law in Declining Exemption:

The primary substantial question of law was whether the Tribunal erred in denying the exemption benefit under the notification dated 28-2-1999. The notification exempts goods from import duty if used in manufacturing finished goods. The appellant argued that they used imported parts for re-manufacturing defective CPTs, which should qualify for the exemption. However, the Tribunal concluded that repairing defective CPTs does not equate to manufacturing new CPTs, thus disqualifying the appellant from the exemption.

2. Repairing vs. Manufacturing:

The appellant claimed that dismantling and converting defective CPTs into new ones constituted manufacturing. However, the Tribunal referenced Rule 16 of the Central Excise Rules, 2002, which distinguishes between repair and manufacturing. The Tribunal also cited a previous decision (Hotline CPT Ltd. v. Commissioner of Central Excise, Indore) where it was held that repair activities do not amount to manufacturing. The Tribunal emphasized that the appellant's activities were repairs, not manufacturing, thus not qualifying for the exemption under notification No. 25/99-Cus.

3. Time-Barred Demand:

The appellant contended that the demand was time-barred and unsustainable. However, the Tribunal found that the appellant did not maintain separate records for inputs used in repairs and did not inform the department about using imported parts for repairs. This lack of disclosure and record-keeping justified the department's demand under Section 28 of the Customs Act, 1962.

4. Informing the Department:

The appellant argued that they had informed the department about the repairs via a letter dated 23-5-2001. The Tribunal examined this letter and found it did not specify the use of imported parts for repairs. The Tribunal concluded that the appellant failed to provide accurate information to the revenue, leading to the issuance of a show-cause notice and subsequent demand.

Conclusion:

The Tribunal upheld the department's decision, stating that the appellant's repair activities did not qualify as manufacturing, thus disqualifying them from the exemption under notification No. 25/99-Cus. The Tribunal also found that the appellant failed to inform the department about the use of imported parts for repairs, justifying the demand raised. The appeal was dismissed, and the substantial question of law was decided against the appellant.