2022 (11) TMI 435 - AT - Central Excise

Process amounting to manufacture - Green Houses - Revenue was of the view that 'greenhouses' are put up as elements to be assembled on site, and appellant was manufacturer of greenhouses where they supply the raw material and carry out erection/ installation also - classification of goods - demand of Central Excise duty on the manufacture clearance of their finished goods with effect from 28.02.2005 - Recovery of Central Excise Duty - demand of interest alongwith penalty - extended period of limitation - HELD THAT - From the perusal of the order of the tribunal in case of JAIN IRRIGATION SYSTEM LTD., SHIV VIJAY SINGHAVI, SHRI DI DESARDA VERSUS COMMISSIONER OF CUSTOMS, NEW DELHI 2018 (11) TMI 897 - CESTAT NEW DELHI , it is evident that the said order has decided the issue of classification of the goods and has not decided the issue in respect of the manufacture. The order is totally silent on this aspect, which goes to the root of the matter i.e. whether the activities undertaken by the appellant would amount to manufacture or not. The issue of manufacture was not even argued before the tribunal in the that case and hence the order to that extent is sub silentio. Appellants have in the present case challenged the demand on the ground that activities undertaken by them do not amount to manufacture. From the perusal of the order of the tribunal in case of Jain Irrigation, it is evident that the said order has decided the issue of classification of the goods and has not decided the issue in respect of the manufacture. The order is totally silent on this aspect, which goes to the root of the matter i.e. whether the activities undertaken by the appellant would amount to manufacture or not. The issue of manufacture was not even argued before the tribunal in the that case and hence the order to that extent is sub silentio. Appellants have in the present case challenged the demand on the ground that activities undertaken by them do not amount to manufacture - the polyhouse/ green house is put up as elements to be assembled at site. It is therefore apparent that the claims of the appellants that they are just purchasing materials and selling the same that they merely collect bought out duty paid items and supply them is not correct in as much as these goods are thereafter assembled and installed at the customer site by the appellant to bring into existence the greenhouse . Commissioner has in para 27 and 28 of his order elaborately referred to the documents and records to arrive at the findings that the goods supplied were essentially complete set of components for erecting and installing the greenhouse. The issue whether the activities undertaken by the appellants do amount to manufacture of Prefabricated building -Green House or not is a question of fact and needs to be ascertained from the facts available on the records. In the paper book filed along with the appeal, appellants have enclosed a number of purchase order and invoices which were in reference to the supply of raw material, and the material. In fact there are no purchase orders/ invoices for the supply of Green House. No clear cut findings have been rendered by any authority on this aspect - Joint commissioner in his order has recorded the factum of issuance of notice demanding service tax and its adjudication. But do not records anything further. All these facts need to be ascertained and final view needs to be taken in the matter for ascertaining whether the activities undertaken by the appellant amounted to manufacture of prefabricated building green house. The matter needs to be remanded back to the original authority to reconsider the issue of manufacture and for recording the findings - Appeal allowed by way of remand.

Issues Involved:
1. Classification of goods as "Green Houses" under Chapter Heading 9406 of the Central Excise Tariff Act, 1985.
2. Determination of whether the activities undertaken by the appellant amount to "manufacture" under Section 2(f) of the Central Excise Act, 1944.
3. Applicability of Central Excise duty on the goods manufactured and cleared by the appellant.
4. Compliance with procedural requirements under the Central Excise Act, 1944 and Central Excise Rules, 2002.
5. Invocation of extended period of limitation for demand of duty.
6. Eligibility for CENVAT credit and cum-duty benefit.
7. Imposition of penalties under the Central Excise Rules, 2002.

Detailed Analysis:

1. Classification of Goods:
The goods cleared by the appellant were classified as "Green Houses" under Chapter Heading 9406 of the Central Excise Tariff Act, 1985. The appellant contended that their activities did not result in the manufacture of "Green Houses" but were limited to the sale of raw materials and erection/installation services. However, the tribunal found that the appellant's activities involved processing raw materials into elements of greenhouses, which were then assembled at the customer's site, thus fitting the definition of "Green Houses" under Chapter Heading 9406.

2. Determination of Manufacture:
The tribunal examined whether the appellant's activities amounted to "manufacture" under Section 2(f) of the Central Excise Act, 1944. The appellant argued that their activities did not constitute manufacture as they involved mere cutting, bending, and drilling of raw materials, which did not change the basic characteristics of the materials. However, the tribunal held that the processes undertaken by the appellant resulted in a new and distinct product, i.e., elements of greenhouses, which were assembled at the customer's site, thus amounting to manufacture.

3. Applicability of Central Excise Duty:
The tribunal confirmed that the appellant was liable to pay Central Excise duty on the manufacture and clearance of greenhouses. The duty was calculated based on the total value of the greenhouses, including both the fabricated components and the bought-out items. The tribunal also allowed the appellant to claim CENVAT credit on the inputs used in the manufacture of greenhouses, subject to verification.

4. Compliance with Procedural Requirements:
The appellant failed to comply with the procedural requirements under the Central Excise Act, 1944 and Central Excise Rules, 2002. They did not obtain registration, did not assess and pay duty, did not maintain proper accounts, and did not file periodical returns. The tribunal upheld the findings of the lower authorities that the appellant contravened various provisions of the Act and Rules.

5. Invocation of Extended Period of Limitation:
The tribunal examined whether the extended period of limitation could be invoked for demanding duty. The tribunal referred to the decision in the case of Jain Irrigation Systems Ltd., where it was held that the issue involved was a classification dispute, and there was no malafide intention on the part of the appellant. Consequently, the extended period of limitation was not applicable, and the demand was limited to the normal period.

6. Eligibility for CENVAT Credit and Cum-Duty Benefit:
The tribunal allowed the appellant to claim CENVAT credit on the inputs used in the manufacture of greenhouses, subject to verification of documents. Additionally, the tribunal granted the benefit of cum-duty price, treating the sale price as inclusive of excise duty, as the appellant had not recovered any excise duty from the customers.

7. Imposition of Penalties:
The tribunal set aside the penalties imposed under Section 11AC of the Central Excise Act, 1944, and the penalties imposed on the employees of the appellant. The tribunal held that there was no contumacious conduct on the part of the appellant or its employees, and the issue was primarily a classification dispute.

Conclusion:
The tribunal remanded the matter to the original authority for reconsideration of the issue of manufacture and for recording clear findings on whether the activities undertaken by the appellant amounted to the manufacture of prefabricated buildings (greenhouses). The original authority was directed to adjudicate the matter within three months, providing a fair opportunity of hearing to the appellant.

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