2024 (4) TMI 371 - AT - Central Excise

Process amounting to manufacture - buying tubes (stainless steel pipes) and then undertaking certain processes thereon, such as, upsetting, heat treatment, inspection, testing, threading and external coating, so that the pipes can be used for the purposes of oil drilling - period April 2007 to March 2012 - Change of opinion - Extended period of limitation - HELD THAT - The present SCN has been issued by the Revenue due to change of opinion and/or interpretation after introduction of the 8 digit tariff. The only case of Revenue is that under the 8 digit tariff, due to processes undertaken by the appellant, the green pipe also falls under Chapter 73 and the processed pipe also falls under Chapter 73, although under different sub-headings and thus, it amounts to manufacture, due to change of the sub-heading. This issue is no longer res integra. Under similar facts and circumstances, the Hon ble Supreme Court in COMMISSIONER OF CENTRAL EXCISE, NEW DELHI-I VERSUS S.R. TISSUES PVT. LTD. 2005 (8) TMI 111 - SUPREME COURT , on the issue of whether the process of unwinding, cutting and slitting to sizes of jumbo rolls of tissue paper would amount to manufacture on the first principles or under Sec 2(f) of the Act, it was held that the activity of slitting and cutting of jumbo rolls of plain tissue paper/aluminium foil into smaller size does not amount to manufacture as character and end-use did not undergo any change on account of winding, cutting/slitting and packing - The aforementioned ruling of the Apex Court covers the issue herein on all fours. Extended period of Limitation - HELD THAT - The SCN is bad as extended period of limitation is not available to Revenue under the admitted fact that all the facts were in the knowledge of the Revenue, as is evident from the earlier SCNs issued either for demand of Excise duty or for demand of service tax. Admittedly, appellant had maintained proper books of accounts and records and have been regularly filing their statutory returns. Even from the list of relied upon documents, these facts are evident as relied upon documents are nothing but the documents maintained by the appellant in the ordinary course of business. The impugned order set aside - appeal allowed.

Summary

Issues Involved:
1. Whether the processes undertaken by the appellant amount to 'manufacture' u/s 2(f) of the Central Excise Act.
2. Validity of the demand raised by invoking the extended period of limitation.
3. Classification of pipes before and after processing under different sub-headings of the Central Excise Tariff.

Summary of Judgment:

1. Processes as 'Manufacture':
The appellant, engaged in buying and processing stainless steel pipes for oil and gas exploration, contended that their activities did not amount to 'manufacture'. The Revenue argued that these processes, which included upsetting, heat treatment, threading, and external coating, transformed the pipes into a different product, thus constituting 'manufacture'. The Tribunal noted that similar processes had previously been deemed not to amount to manufacture by the Commissioner (Appeals) and that decision had been accepted by the department. The Tribunal referenced the Supreme Court ruling in CCE vs SR Tissues Pvt Ltd, which held that mere changes in sub-headings due to processing do not constitute manufacture if the character and end-use remain unchanged.

2. Extended Period of Limitation:
The SCN dated 01.05.2012 demanded duty for the period April 2007 to March 2012, invoking the extended period of limitation. The appellant argued that the demand was time-barred as all relevant facts were within the knowledge of the department, evidenced by previous SCNs and regular statutory returns. The Tribunal found that the demand was indeed time-barred, as the extended period of limitation was not applicable given the department's prior knowledge of the appellant's activities.

3. Classification of Pipes:
The Revenue's case hinged on the introduction of the 8-digit tariff in 2005, arguing that the processed pipes fell under a different sub-heading (CETH 7304 2390) than the raw pipes (CETH 7304 1910), thus amounting to manufacture. The Tribunal, however, held that the mere change in sub-heading due to processing did not constitute manufacture, referencing the Supreme Court's ruling that transformation into a different commercial commodity is necessary to constitute manufacture.

Conclusion:
The Tribunal set aside the impugned orders, holding that the processes undertaken by the appellant did not amount to manufacture, and the demand was time-barred. The appeals were allowed, and the appellant was entitled to consequential benefits in accordance with the law.

(Pronounced in the Open Court on 08.04.2024)