2004 (5) TMI 182 - AT - Central Excise

Summary

Issues Involved:

1. Whether the activities of slitting, rolling, and painting aluminum sheets amount to "manufacture" under Section 2(f) of the Central Excise Act.
2. Whether the show cause notices issued are time-barred under the proviso to Section 11A of the Central Excise Act.
3. Whether M/s. Aldec Corporation is liable for Central Excise duty on the painted aluminum slats.
4. Whether M/s. Aldec Corporation is eligible for Modvat credit if the activities are considered as manufacture.

Issue-wise Detailed Analysis:

1. Whether the activities of slitting, rolling, and painting aluminum sheets amount to "manufacture" under Section 2(f) of the Central Excise Act:

The appellants argued that neither the cutting or slitting of aluminum sheets into strips nor the painting of these strips amounts to manufacture. They cited previous departmental decisions where similar activities were deemed not to constitute manufacturing. The Commissioner of Central Excise, in the impugned order, held that the combined processes undertaken at M/s. Srinivasa and M/s. Vittaleshwara amounted to manufacture. However, the Tribunal found that the processes carried out in 1985-86 remained the same and were not considered as manufacturing then. The Tribunal emphasized that for an activity to be considered as manufacture, it should result in a new product with a distinct name, character, and use, which did not occur in this case. The Tribunal concluded that the conversion of sheets into strips and painting did not bring into existence a new product known in the market with a distinct character and use.

2. Whether the show cause notices issued are time-barred under the proviso to Section 11A of the Central Excise Act:

The appellants contended that the show cause notices were time-barred as the department was aware of their activities since 1986, and the proceedings initiated by the department were dropped at various stages. The Tribunal agreed with the appellants, noting that the entire activities of M/s. Aldec Corporation, M/s. Vittaleshwara, and M/s. Srinivasa were known to the department. Therefore, the extended period under Section 11A could not be applied for demanding duty, making the show cause notices time-barred.

3. Whether M/s. Aldec Corporation is liable for Central Excise duty on the painted aluminum slats:

The Tribunal found that the processes carried out did not amount to manufacture, and no new excisable product had come into existence. Consequently, M/s. Aldec Corporation was not liable for Central Excise duty on the painted aluminum slats. The Tribunal also noted that the classification of the finished product under Chapter Sub-Heading 7616.90 by the Commissioner was incorrect, as the painted strips did not fall under this heading.

4. Whether M/s. Aldec Corporation is eligible for Modvat credit if the activities are considered as manufacture:

Since the Tribunal concluded that the activities did not amount to manufacture and no new excisable product came into existence, the issue of Modvat credit eligibility did not arise.

Conclusion:

The Tribunal allowed the appeals, holding that the activities of slitting, rolling, and painting aluminum sheets did not amount to manufacture. Consequently, M/s. Aldec Corporation was not liable for Central Excise duty, and the show cause notices were time-barred. The Tribunal also found that the classification of the finished product under Chapter Sub-Heading 7616.90 was incorrect.