2006 (5) TMI 11 - AT - Central Excise

Central Excise Manufacture Substantial repairing by replacing damaged parts taken place (2) Constructive loss (3) Demand (4) Suppression of facts with intent to evade duty

Summary

Issues:
1. Whether the appellant cleared a re-manufactured transformer without paying central excise duty.
2. Whether there was suppression of facts with intent to evade payment of duty.
3. Whether the extended period for issuing the Show-cause Notice was justified.
4. Whether salvaged parts from the accidented transformer were used in manufacturing a new transformer.

Analysis:
1. The appellant dispatched a damaged transformer after an accident, brought it back, restored it, and cleared it without paying central excise duty. The authorities alleged that the appellant cleared a re-manufactured transformer without duty payment, leading to a duty demand and penalty proposal. The Joint Commissioner and the Commissioner (Appeals) found that substantial repair tantamounted to manufacture, justifying the duty demand.

2. The appellant denied the charges of suppression, arguing that it was a repair and not manufacturing. The authorities noted that the appellant did not provide the insurance claim or survey report, leading to a finding of suppression. However, the Tribunal disagreed, stating that non-reporting of routine activities to excise does not imply intent to evade duty.

3. The authorities justified the extended notice period under the proviso to Section 11A of the Central Excise Act due to alleged suppression. However, the Tribunal found no suppression and ruled that the extended period was not applicable, supporting the appellant's stance.

4. The dispute centered on whether salvaged parts were used in manufacturing a new transformer. The authorities believed it was a case of manufacturing, considering the compensation paid by the insurance company. The Tribunal disagreed, stating that the appellant only replaced damaged parts, which does not constitute manufacturing under Rule 173H, ultimately ruling in favor of the appellant.

The Tribunal emphasized that repair activity remains the same regardless of scope, and restoration of equipment after an accident does not automatically constitute manufacturing. The judgment highlighted the importance of distinguishing between repair and manufacturing activities, especially in cases involving damaged goods. The appellant's appeal was allowed, with the Tribunal providing consequential relief.