2025 (4) TMI 689 - AT - Central Excise

Activity amounting to manufacture - activity of packing and labeling tyre O rings by the appellants - HELD THAT - The product O rings has been specifically mentioned in Chapter Tariff Item 4016 93 20 as Rubber rings (O-ring) . The O rings are also classified under Chapter 87 in the circumstances when those were used as parts components and assemblies of automobiles . The O rings dealt with by the appellants in this case are not exclusively usable only in automobile industries as the same can also be used for other purposes. The said O rings are not confined as parts components and assemblies of automobiles industry only. Thus it is agreed with the order of the original authority who had classified the product under Chapter 4016. Further mere packing of the O rings and putting of label thereon shall not amount to manufacture inasmuch as no distinct and identifiable product emerges as a result of process of such packing or putting the logo thereon. Conclusion - The appellants are not liable to pay central excise duty in respect of the tyre O rings removed from the factory. The impugned order is set aside - appeal allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The primary legal issue considered was whether the activity of packing and labeling tyre 'O' rings by the appellants constitutes 'manufacture' under Section 2(f)(iii) of the Central Excise Act, 1944, thereby making the appellants liable to pay central excise duty. The secondary issue was the correct classification of the tyre 'O' rings under the Central Excise Tariff Act, 1985, specifically whether they should be classified under Chapter 4016 or Chapter 87.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The legal framework centers on the interpretation of 'manufacture' under Section 2(f)(iii) of the Central Excise Act, 1944, which includes processes that result in a new and distinct product. The classification of goods under the Central Excise Tariff Act, 1985, is also pivotal, particularly the distinction between Chapters 40 and 87.

Court's Interpretation and Reasoning

The Tribunal examined whether the appellants' activities constituted 'manufacture'. It found that packing and labeling did not transform the 'O' rings into a new product with a distinct identity, thus not meeting the criteria for 'manufacture'. The Tribunal also analyzed the appropriate tariff classification, determining that the 'O' rings should be classified under Chapter 4016 as 'Rubber rings (O-ring)', rather than under Chapter 87, which pertains to parts and components of automobiles.

Key Evidence and Findings

The Tribunal reviewed the original adjudication order and the subsequent appeal decision. It noted that the original authority classified the 'O' rings under Tariff Item 4016 93 20 and found that the activities did not constitute manufacture. The Tribunal also considered the invoices showing VAT charges, supporting the classification under Chapter 4016.

Application of Law to Facts

Applying the legal definition of 'manufacture', the Tribunal concluded that the appellants' activities of packing and labeling did not result in a new product. Therefore, the appellants were not liable for central excise duty. Regarding classification, the Tribunal found that the 'O' rings were not exclusively used in the automobile industry, supporting their classification under Chapter 4016 instead of Chapter 87.

Treatment of Competing Arguments

The Tribunal addressed the Revenue's argument that the 'O' rings should be classified under Chapter 87 due to their use in automobiles. It countered this by emphasizing the broader applicability of the 'O' rings beyond the automobile industry, which justified their classification under Chapter 4016.

Conclusions

The Tribunal concluded that the appellants' activities did not constitute 'manufacture' under the Central Excise Act, 1944. It also determined that the correct classification of the 'O' rings was under Chapter 4016, not Chapter 87, thus negating the need for central excise duty payments.

SIGNIFICANT HOLDINGS

The Tribunal held that "mere packing of the 'O' rings and putting of label thereon shall not amount to manufacture, inasmuch as no distinct and identifiable product emerges as a result of process of such packing or putting the logo thereon." This establishes the principle that packaging and labeling alone do not constitute 'manufacture' under the Central Excise Act, 1944.

The Tribunal also established that the classification of goods under the Central Excise Tariff Act, 1985, should consider the broader applicability of the product, rather than its use in a specific industry. The final determination was that the appellants were not liable to pay central excise duty on the tyre 'O' rings, and the appeal was allowed in favor of the appellants.