2000 (6) TMI 110 - AT - Central Excise

Summary

Issues:
1. Whether the process of packing water filter parts and affixing a brand name amounts to a process of manufacture attracting Central Excise duty.
2. Whether the conversion of incomplete or unfinished articles into complete articles constitutes a process of manufacture.
3. Whether the appellants are liable to pay duty on the complete product "Aqua Guard ST-2000."
4. Whether the appellants deliberately attempted to evade duty, leading to penalty and interest charges.
5. Whether the decision of the West Zonal Bench of CEGAT, Mumbai, in a similar case is applicable to the present case.

Analysis:
1. The appeal concerned duty demands imposed on the appellants for packing water filter parts and presenting the complete unit as "Aqua Guard ST-2000." The Commissioner held that this process amounted to manufacture, attracting duty under the Central Excise Act. The appellants argued that affixing the brand name did not create new goods as all parts had already suffered duty. However, the Commissioner invoked Section Note 6 of Section XVI of CET, stating that converting incomplete articles into complete ones constitutes manufacture, thus requiring duty payment.

2. The appellants contended that the process did not amount to manufacture, emphasizing that all items were purchased with duty paid, and assembly did not create new goods. They referred to a similar case before the West Zonal Bench of CEGAT, Mumbai, where the demands were set aside. The Tribunal analyzed the issue in detail, considering whether the activity changed the nature of the goods to create a new product with distinct characteristics. It concluded that the addition of a pre-filter did not alter the essential nature of the product, thus not constituting manufacture under Section Note 6 of Section XVI.

3. The Commissioner imposed penalties for alleged duty evasion, citing deliberate attempts to suppress facts. The appellants argued that the process did not result in new goods and that the West Zonal Bench's decision should apply to their case. The Tribunal found that the addition of a pre-filter did not change the essential nature of the product, leading to the set aside of the impugned order and allowing the appeal.

4. The issue of deliberate duty evasion was raised, with the appellants citing the decision of the West Zonal Bench in a similar case. The Tribunal examined the activity in question, focusing on whether the addition of a pre-filter transformed the product into a new, commercially distinct article. It concluded that the appellants' process did not amount to manufacture, setting aside the impugned order and allowing the appeal.

5. The appellants argued that the decision of the West Zonal Bench in a similar case should apply to their situation. The Tribunal analyzed the facts and reasoning in the previous case, finding that the addition of a pre-filter did not change the essential nature of the product, leading to the set aside of the impugned order and allowing the appeal.