1987 (1) TMI 216 - AT - Income Tax

Summary

Issues Involved:
1. Whether the activity at Nangal Shama constitutes "manufacture" u/s Central Excises and Salt Act.
2. Classification of the goods under the appropriate tariff item.
3. Validity of the penalty imposed by the Collector.

Summary:

Issue 1: Whether the activity at Nangal Shama constitutes "manufacture" u/s Central Excises and Salt Act.

M/s PCA argued that their activity at Nangal Shama, which involved packing various components purchased from different suppliers, did not constitute "manufacture" as defined under the Central Excises and Salt Act. They claimed that they merely packed the items together for consumer convenience without any manufacturing process. However, the Tribunal concluded that the activity of putting together and packing the components to create the twink inframatic cuisinette and twink simmermatic cuisinette resulted in new excisable goods. The Tribunal emphasized that the process created new utility collections or commodities that had never been seen before, thus constituting manufacture.

Issue 2: Classification of the goods under the appropriate tariff item.

The Central Excise Department initially assessed the goods under Item 33C but later claimed that the griller and stove were components of electric cookers assessable under Item 68. The Tribunal found that the two cuisinettes, twink inframatic and twink simmermatic, should be classified as cookers under Tariff Item 33C of the Central Excise Tariff. The Tribunal noted that the griller and stove, when combined with their respective components, created new products that were assessable under Item 33C.

Issue 3: Validity of the penalty imposed by the Collector.

The Tribunal upheld the penalty imposed by the Collector, finding that M/s PCA's actions were an attempt to avoid tax. The Tribunal referred to the Supreme Court judgment in McDowell and Company Limited v. Commercial Tax Officer, which emphasized that tax avoidance through colorable devices is not permissible. The Tribunal concluded that M/s PCA's packing activities at Nangal Shama were designed to evade excise duty, and therefore, the penalty imposed was justified.

Conclusion:

The Tribunal rejected the appeal, upheld the classification of the goods under Item 33C, and confirmed the penalty imposed by the Collector. The Tribunal emphasized that the activities at Nangal Shama constituted manufacture, resulting in new excisable goods.