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2023 (10) TMI 162 - AT - Central ExciseProcess amounting to manufacture - fitting the lens on to the frames to make spectacles that can be used by a customer - Department was of the view that after fitment of the lens in to the frames a distinct new marketable commodity viz. spectacle emerges - N/N. 16/2012-CE dated 17.03.2012 and at 6% (with CENVAT Credit) vide N/N. 19/2012 CE dated 17.03.2012 - HELD THAT - As categorically held by the Hon ble High Court that the activity of fitting the power lens into the frames does not amount to manufacture. After appreciating the facts and evidence and also following the decision of the Jurisdictional High Court in the case of TITAN COMPANY LIMITED, M/S. PREMIER OPTICAL PVT. LTD., MRS. GEETANJALI D SOUZA PRABHU VERSUS COMMISSIONER OF CENTRAL EXCISE LTU, ADDITIONAL DIRECTOR GENERAL DIRECTORATE GENERAL OF CENTRAL EXCISE, CHAIRMAN CENTRAL BOARD OF EXCISE CUSTOMS DEPARTMENT OF REVENUE AND THE JOINT COMMISSIONER OF CENTRAL EXCISE, CHENNAI II 2021 (10) TMI 1029 - MADRAS HIGH COURT , it is held that the activity does not amount to manufacture. The demand cannot be sustained. The issue on merits is answered in favour of the assessee and against the Revenue. Time Limitation - HELD THAT - The department has derived the figures from the income tax returns filed by the appellant. Several audits were conducted as the appellant is registered with service tax commissionerate. Further the issue is purely interpretational in nature. There is no evidence that appellant has suppressed facts with intent to evade payment of duty. Taking these aspects in to consideration, the show cause notice issued invoking the extended period cannot sustain. The issue on limitation is answered in favour of assessee and against the department. The impugned order is entirely set aside. The appeals are allowed.
Issues Involved:
1. Whether the activity of fitting lenses into frames to create spectacles amounts to manufacture under Section 2(f) of the Central Excise Act, 1944. 2. Whether the demand for Central Excise Duty is sustainable on the grounds of limitation. 3. Whether the penalty imposed on Ms. Susila Girisan under Rule 26 of the Central Excise Rules, 2002 is justified. Summary: 1. Manufacture of Spectacles: The primary issue was whether the activity of fitting lenses into frames to create spectacles constitutes "manufacture" under Section 2(f) of the Central Excise Act, 1944. The department alleged that this activity resulted in a new marketable commodity, "spectacles," thus attracting Central Excise Duty. The appellant argued that the lenses and frames were separately purchased, duty-paid items, and the activity of fitting them together did not amount to manufacture. The Tribunal referred to the decision of the Hon'ble Madras High Court in the case of Titan Company Limited, which held that such an activity does not constitute manufacture. The Tribunal concluded that the activity of fitting lenses into frames does not amount to manufacture and thus, the demand for excise duty could not be sustained. 2. Limitation: The appellant contended that the demand was time-barred as the extended period of limitation could not be invoked. The Tribunal noted that the appellant was a registered service tax assessee and had disclosed all relevant financial information during audits. The issue was interpretational in nature, and there was no evidence of willful suppression of facts with intent to evade duty. Therefore, the Tribunal held that the show cause notice issued by invoking the extended period of limitation was not sustainable. 3. Penalty on Ms. Susila Girisan: The Tribunal also addressed the penalty imposed on Ms. Susila Girisan under Rule 26 of the Central Excise Rules, 2002. It was argued that Ms. Girisan was not involved in any activities that would attract the provisions of Rule 26, as she was under the bona fide belief that the activity did not amount to manufacture. The Tribunal found merit in this argument and held that the penalty imposed on Ms. Girisan was not justified. Conclusion: The Tribunal set aside the impugned order, holding that the activity of fitting lenses into frames does not amount to manufacture, the demand was time-barred, and the penalty on Ms. Susila Girisan was not justified. The appeals were allowed with consequential reliefs.
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