2025 (1) TMI 672 - AT - Central Excise

Process amounting to manufacture or not - activity of packing/ repacking, labeling/ re-labeling of machine parts undertaken by the appellants - classification of earthmoving machines - to be classified as automobiles or not - HELD THAT - This Bench in the case of Donaldsons India Filter Systems Pvt. Ltd. 2024 (7) TMI 544 - CESTAT CHANDIGARH held that 'the amendment carried out w.e.f. 29.04.2010 makes it abundantly clear that a legislature did not intend to tax the parts, components and assemblies of earthmoving equipment etc. under the Head Automobiles ; therefore, to this extent, the demand for the period prior to 29.04.2010 cannot be sustained.' It is further found that Commissioner, Pune vide his Order dated 13.07.2012 observed that 'the activities of packing and repacking of parts, components and assemblies of earth moving machinery falling under Chapter Heading 8429. manufactured by the assessee, have been made liable to Central Excise duty retrospectively, with effect from 29-04-2010, in view of the retrospective amendment made in the Third Schedule to the Central Excise Act, 1944, by inserting Entry 100A in the said Schedule vide Section 73 read with Twelfth Schedule to the Finance Act, 2011. The Finance Act. 2011, got assent of the Hon'ble President of India, on 08-04-2011 and hence the said retrospective amendment came into force only on 08-4- 2011. Conclusion - i) The word 'automobile' has not been defined in the Central Excise Act, and thus, common parlance and dictionary definitions should guide its interpretation. ii) The amendment made in the Third Schedule to the Central Excise Act by Finance Act, 2011 w.e.f. 29.04.2010 by adding serial no. 100A to the Third Schedule is prospective in nature. iii) Earthmoving machines involved in the present appeals are not 'automobiles. The impugned orders cannot be sustained and are liable to be set aside - Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment primarily revolves around the following core issues:

Whether the activities of packing, repacking, labeling, and relabeling of parts of earthmoving machines by the appellants qualify as "manufacture" under Section 2(f)(iii) of the Central Excise Act.
Whether the classification of earthmoving machines should be considered under the same category as "automobiles" for the purpose of excise duty imposition.
Whether the amendment made in the Third Schedule to the Central Excise Act by Finance Act, 2011, introducing serial no. 100A, has retrospective application.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Qualification of Activities as "Manufacture"

Relevant Legal Framework and Precedents: The legal framework involves Section 2(f)(iii) of the Central Excise Act, which defines "manufacture." The interpretation of this section in relation to the activities of packing, repacking, labeling, and relabeling is crucial.
Court's Interpretation and Reasoning: The court examined whether these activities amount to "manufacture." The Tribunal's Larger Bench had previously ruled that such activities do not constitute manufacturing unless specified otherwise by the law.
Key Evidence and Findings: The court considered the findings from the Larger Bench and prior decisions by adjudicating authorities in Kolkata and Pune, which favored the appellants.
Application of Law to Facts: The court applied the definition of "manufacture" under the Central Excise Act and concluded that the activities in question did not qualify as manufacturing prior to the amendment.
Treatment of Competing Arguments: The Department argued for the inclusion of these activities under manufacturing, but the court found the appellants' reliance on prior rulings and the Larger Bench's decision more compelling.
Conclusions: The court concluded that the activities undertaken by the appellants did not constitute "manufacture" under the relevant legal provisions for the period in question.

Issue 2: Classification of Earthmoving Machines as "Automobiles"

Relevant Legal Framework and Precedents: The classification issue involves the Central Excise Tariff, which distinguishes between "automobiles" and "earthmoving machines."
Court's Interpretation and Reasoning: The court referred to the Larger Bench's decision, which clarified that earthmoving machines are not classified as "automobiles" under the Central Excise Tariff.
Key Evidence and Findings: The court considered the absence of a definition for "automobile" in the Central Excise Act and relied on dictionary meanings and common parlance.
Application of Law to Facts: The court determined that earthmoving machines, being classified under a different chapter, should not be treated as automobiles for excise purposes.
Treatment of Competing Arguments: The Department's argument that earthmoving machines should be classified as automobiles was rejected based on the Tribunal's prior rulings and dictionary definitions.
Conclusions: The court held that earthmoving machines are not "automobiles" and should be classified separately under the Central Excise Tariff.

Issue 3: Retrospective Application of Amendment

Relevant Legal Framework and Precedents: The amendment in question is the insertion of serial no. 100A in the Third Schedule to the Central Excise Act by the Finance Act, 2011.
Court's Interpretation and Reasoning: The court found that the amendment was prospective, applying only from 29.04.2010, as clarified by the Larger Bench and subsequent legal interpretations.
Key Evidence and Findings: The court considered the legislative intent and the language of the amendment, which indicated its prospective nature.
Application of Law to Facts: The court applied the principle that amendments affecting substantive rights are generally prospective unless explicitly stated otherwise.
Treatment of Competing Arguments: The Department's contention for retrospective application was dismissed, aligning with the Tribunal's and other authorities' conclusions.
Conclusions: The court concluded that the amendment did not have retrospective effect, thus not impacting the period before 29.04.2010.

3. SIGNIFICANT HOLDINGS

The court reiterated that "the word 'automobile' has not been defined in the Central Excise Act," and thus, common parlance and dictionary definitions should guide its interpretation.
The court underscored that "the amendment made in the Third Schedule to the Central Excise Act by Finance Act, 2011 w.e.f. 29.04.2010 by adding serial no. 100A to the Third Schedule is prospective in nature."
It was held that "earthmoving machines involved in the present appeals are not 'automobiles,'" affirming the distinction in classification under different chapters of the Central Excise Tariff.
The final determination was that the impugned orders demanding excise duty for the period prior to 29.04.2010 could not be sustained, leading to the allowance of the appeals.

The judgment emphasizes the importance of precise classification and the prospective nature of legislative amendments, reinforcing the need for clear legislative language to avoid retrospective imposition of duties.

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