1990 (11) TMI 246 - AT - Central Excise

Summary

Issues Involved:
1. Whether the manufacture of goods takes place in terms of the Central Excise Law when the forged crankshaft is converted into a finished crankshaft at the hands of the outside job workers or at the hands of the assessee.
2. Whether the assessee is the manufacturer in the facts and circumstances of the case in respect of the said crankshafts.
3. Whether the demand is time-barred having been issued beyond the normal period of six months.

Detailed Analysis:

1. Manufacture of Goods:
The primary issue was whether the transformation of a forged crankshaft into a finished crankshaft by outside job workers constitutes "manufacture" under Central Excise Law. The assessee argued that no new commodity with a different name, character, or use was created and thus no manufacturing took place. However, the Collector's findings indicated that the imported crankshaft forgings, after undergoing grinding, processing, and machining, became identifiable motor vehicle parts, attracting duty under Tariff Item 68. The Tribunal agreed with the Collector, stating that a new product involving the process of manufacture comes into existence at the hands of the outside job workers when the forged crankshaft is converted into a finished crankshaft. Thus, a fresh duty liability under T.I. 68 arises for the finished crankshaft.

2. Manufacturer Status:
The second issue was whether the assessee could be considered the manufacturer of the crankshafts. The assessee contended that the finished crankshafts were manufactured by the outside job workers, and hence, the duty liability should be on those job workers. The Tribunal noted that the assessee was availing of the procedure under Rule 56B of the Central Excise Rules, which allows for semi-finished goods to be sent out for further processing and brought back without payment of duty. By availing of this facility, the assessee undertook to discharge the duty liability on the finished goods. Therefore, for the period up to 15-1-1983, the assessee was deemed the manufacturer. However, for the period after 15-1-1983, the Tribunal found that the assessee ceased to be the manufacturer as there was no inter-relationship making the job workers mere facades or dummies for the assessee. Thus, the duty liability for the period after 15-1-1983 could not be imposed on the assessee.

3. Time-barred Demand:
The third issue was whether the demand raised was time-barred. The Tribunal found merit in the assessee's plea that there was no suppression or misstatement of facts. The assessee had availed and subsequently withdrawn from the Rule 56B procedure with the department's full knowledge and consent. Consequently, any demand should have been raised within the statutory period of six months. The Tribunal concluded that the demand should be restricted to the period of six months preceding the receipt of the show cause notice.

Conclusion:
The appeals and cross-objections were disposed of with the following conclusions:
- The manufacture of finished crankshafts by outside job workers constitutes "manufacture" under Central Excise Law, creating a fresh duty liability.
- The assessee was considered the manufacturer for the period up to 15-1-1983 due to availing of Rule 56B, but not for the period after 15-1-1983.
- The demand was time-barred beyond the normal period of six months, limiting the recoverable amount to the six months preceding the show cause notice.

The Tribunal ordered the revision of the demand and the disposal of refund claims in light of these observations. Additionally, the appeal relating to the demand of Rs. 2,00,649.32 was allowed, and the appeal relating to the refund was dismissed with directions for the immediate grant of refund.