1996 (7) TMI 228 - AT - Central Excise

Summary

Issues:
Manufacture of Rock Drilling bits, Replacement of damaged diamonds, Claim for refund, Assessable value determination

Manufacture of Rock Drilling bits:
The appellants are engaged in manufacturing Rock Drilling bits containing reaming shells with industrial diamonds for cutting. The dispute arises regarding the replacement of damaged diamonds in the drilling bits. The Collector (Appeals) previously held that replacing salvaged or new diamonds in worn-out bits does not amount to manufacturing new bits. However, the current appeal relates to the use of salvaged diamonds in manufacturing new Rock Drilling bits. The Tribunal determines that using salvaged diamonds in new bits constitutes manufacturing, impacting the assessable value. Consequently, the claim for refund related to this activity is deemed invalid.

Replacement of damaged diamonds:
When drilling bits are damaged, a percentage of diamonds deteriorate and need replacement with new ones. The appellants repair worn-out bits by replacing damaged diamonds with salvaged or new ones. The customers pay for new diamonds and resetting charges but not for salvaged diamonds when refitted in the bits. The Tribunal notes that the refund claim does not pertain to salvaged diamonds refitted in old bits but to the manufacture of new bits using salvaged diamonds. This distinction is crucial as fitting salvaged diamonds in new bits constitutes manufacturing, affecting the assessable value and negating the refund claim.

Claim for refund:
The appeal involves a claim for refund concerning the manufacturing process of new Rock Drilling bits using salvaged diamonds. The Tribunal clarifies that the earlier decision by the Collector (Appeals) regarding salvaged diamonds in old bits does not apply to the current situation of salvaged diamonds in new bits. As manufacturing new bits with salvaged diamonds impacts the assessable value, the claim for refund related to this activity is deemed invalid. The lower authorities' stance aligns with the Tribunal's decision, leading to the dismissal of the appeal.

Assessable value determination:
The Tribunal emphasizes that the activity of manufacturing new Rock Drilling bits using salvaged diamonds constitutes manufacturing and affects the assessable value. As a result, the claim for refund related to this manufacturing process is considered invalid. The decision upholds the Collector (Appeals) ruling that fitting salvaged diamonds in old bits does not amount to manufacturing but distinguishes it from using salvaged diamonds in the production of new bits, which falls under the manufacturing process impacting the assessable value. The appeal is dismissed based on these findings.