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1991 (5) TMI 177 - AT - Central Excise
Issues Involved:
1. Whether the re-assembly of tea chests from dismantled plywood panels constitutes "manufacture" under Section 2(f) of the Central Excises & Salt Act, 1944. 2. Whether the appellant company or the job workers should be considered the "manufacturer" of the re-assembled tea chests. 3. Applicability of the extended time limit for demand under Rule 9(2) read with Section 11A and the imposition of penalty under Rule 173Q. Issue-Wise Detailed Analysis: 1. Whether the re-assembly of tea chests from dismantled plywood panels constitutes "manufacture" under Section 2(f) of the Central Excises & Salt Act, 1944: The core question was whether the re-assembly of tea chests from dismantled plywood panels, often in different sizes, involves a process of manufacture as defined under Section 2(f) of the Act. The Tribunal referred to a previous decision (Order No. E/272/90-D dated 12th April, 1990) where it was held that no new product emerged from the re-assembly process, and thus, it did not constitute "manufacture." The Tribunal observed that the process was more akin to repair or reconditioning, and not the creation of a new article with a distinct name, character, or use. The Tribunal also cited the Bombay High Court decision in Century Spinning (1981 (8) E.L.T. 676), where it was held that merely melting worn-out spinnerettes did not result in a new product liable to duty. Similarly, the Supreme Court's judgment in Bharat Forge & Press Industries (1990 (45) E.L.T. 525) supported the view that pipe fittings made from pipes and tubes continued to be classified as pipes and tubes, emphasizing that a mere change in form does not constitute a new product. 2. Whether the appellant company or the job workers should be considered the "manufacturer" of the re-assembled tea chests: The Department argued that since the appellant company supplied raw materials to job workers who then assembled the tea chests, the job workers were essentially contractors, and the appellant was the real manufacturer. The Tribunal, however, found that the job workers operated on a principal-to-principal basis, without any written contracts, and were paid job charges for their work. The Tribunal emphasized that the nature of the relationship did not change the fundamental question of whether the re-assembly process constituted "manufacture." The Tribunal concluded that if the re-assembly did not amount to manufacture when done by one party, it could not be considered manufacture when done by multiple parties. Therefore, the question of who the manufacturer was became irrelevant once it was established that no manufacture was involved. 3. Applicability of the extended time limit for demand under Rule 9(2) read with Section 11A and the imposition of penalty under Rule 173Q: The Collector had confirmed a demand for Rs. 18,77,365.38 for the period 1-8-1977 to 30-6-1982 and imposed a penalty of Rs. one lakh, alleging mis-statement or suppression of facts by the appellant company. The Tribunal found that the Collector's findings were based on a bald statement without supporting evidence. The Tribunal also noted that the re-assembly of tea chests was not done clandestinely, and hence, the extended time limit of five years could not be invoked. The Tribunal referenced the case of Vasant Sahakari Sakhar Karkhana Ltd. (1989 (43) E.L.T. 98 Trib.), where it was held that the extended period was not applicable when the nature of the product and its by-products were not suppressed from the Department. Consequently, the Tribunal concluded that the conduct of the appellant company did not warrant the imposition of a penalty. Conclusion: The Tribunal concluded that the re-assembly of tea chests from dismantled plywood panels did not constitute "manufacture" under Section 2(f) of the Act. As a result, there was no liability to duty on the re-assembled tea chests. The Tribunal set aside the orders of the lower authorities and allowed both appeals with consequential relief, if any.
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