1997 (2) TMI 295 - AT - Central Excise

Summary

Issues:
1. Challenge to duty demand set aside by Collector (Appeals).
2. Whether activities undertaken by the respondent amount to manufacturing activities.
3. Classification of products under sub-heading No. 7308.90.
4. Interpretation of 'manufacturing processes' under Central Excise Law.

Analysis:

1. The appeal was filed challenging the order-in-original dated 31-7-1992 where duty demand of Rs. 39,65,613/- was set aside by the Collector (Appeals). The Department contended that the activities of the respondent amounted to manufacturing activities as per Section 2(f) of the Central Excise Act.

2. The case involved a project for the construction and installation of a gas power plant where equipment and machinery were obtained from a foreign company. The Department issued a show cause notice demanding duty, alleging that the activities at the site amounted to manufacturing. However, the respondent contended that they were acting as labor contractors for fabrication work, not manufacturing excisable goods.

3. The Department argued that the products, namely iron and steel structures, should be classified under sub-heading No. 7308.90 as movable structures capable of transportation. The Tribunal referred to a previous decision and highlighted that the fabricated items had acquired a distinct character, use, and name different from the raw materials used.

4. The Tribunal examined the meaning of 'manufacturing processes' under Central Excise Law, citing a Supreme Court decision. It was noted that the transformation of materials into something with a distinct character and commercially known differently constitutes manufacturing. The Tribunal found that the items received in various forms were subsequently welded and assembled before erection, acquiring a new character and commercial identity.

5. Considering the submissions and evidence, the Tribunal found merit in the Department's appeal. It was concluded that the activities undertaken by the respondent did amount to manufacturing as the fabricated items had transformed into distinct products with commercial recognition. Therefore, the impugned order was set aside, and the appeal was allowed.