2002 (5) TMI 50 - SC - Central Excise

Whether assembly of components imported in Semi Knocked Down (SKD) condition into VTRs/colour monitors did not amount to manufacture for the purpose of levy of excise duty? Held that - The Tribunal was right in its conclusion that the appellant was liable to pay duty on the end product. The decisions cited before us by the learned Counsel for the appellant in support of his stand were considered by the Tribunal and rightly distinguished on facts. We do not think it necessary to consider them again. The contention, that the Collector could not have issued one more notice on the same set of facts when the proceeding initiated pursuant to the show cause notices issued by the Superintendent earlier were not completed, is equally untenable. The notice issued by the Collector subsequent to the issuance of notices by the Superintendent was only in continuation of the earlier two notices, which fact is evident from the notice itself. Further even issue of notice by the Superintendent earlier could not take away the jurisdiction and authority of the Collector in issuing a notice and passing the order of adjudication. The Tribunal was right in rejecting this contention also. Against assessee.

Issues Involved:
1. Whether the assembly of imported disassembled VTRs with color monitors constitutes "manufacture" under Section 2(f) of the Central Excise & Salt Act, 1944.
2. Whether the demand for excise duty is barred by limitation.
3. Whether the Collector had the jurisdiction to issue a third show cause notice while the proceedings pursuant to the earlier two show cause notices were still pending.

Issue-wise Detailed Analysis:

1. Assembly as Manufacture:
The appellant contended that assembling imported components in Semi Knocked Down (SKD) condition into VTRs and color monitors did not amount to manufacture. They argued that the process involved merely fastening components without any significant manufacturing activity or use of power. The Supreme Court referred to its earlier judgment in Union of India v. Delhi Cloth and General Mills, which defined "manufacture" as bringing into existence a new substance with a distinct name, character, or use. The Court found that the assembly process undertaken by the appellant resulted in a transformation of the imported kits into a new product known in the market as VTRs and color monitors. This transformation constituted manufacture as per Section 2(f) of the Act. The Tribunal's findings were upheld, confirming that the assembly process amounted to manufacture, making the appellant liable to pay excise duty on the finished products.

2. Limitation for Demand of Duty:
The appellant argued that the demand for duty was barred by limitation and that the extended period of limitation under Section 11-A was not applicable as there was no willful suppression, fraud, or misrepresentation. The Court noted that the appellant had cleared the goods without informing the excise authorities and without paying the duty, indicating an intent to evade payment. The Collector and the Tribunal both found that the appellant's conduct justified invoking the extended period of limitation. The Supreme Court agreed with this finding, stating that the appellant's failure to provide necessary intimation and delay in responding to show cause notices demonstrated a lack of bona fides, thus making the extended period of limitation applicable.

3. Jurisdiction of the Collector for Issuing Third Show Cause Notice:
The appellant contended that the Collector could not issue a third show cause notice while the proceedings pursuant to the earlier two notices were still pending. The Supreme Court rejected this contention, stating that the third notice was issued in continuation of the earlier two notices. The Court emphasized that the issuance of notices by the Superintendent did not preclude the Collector from exercising jurisdiction and authority to issue a subsequent notice and pass an adjudicatory order. The Tribunal's rejection of this argument was upheld, confirming the Collector's jurisdiction in the matter.

Conclusion:
The Supreme Court dismissed the appeal, upholding the findings of the Collector and the Tribunal. The assembly of imported components into VTRs and color monitors was deemed to constitute manufacture, making the appellant liable for excise duty. The extended period of limitation was applicable due to the appellant's intent to evade duty, and the Collector had jurisdiction to issue the third show cause notice. The appeal was found to be without merit and was dismissed with no costs.

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