1999 (4) TMI 287 - AT - Central Excise

Summary

Issues Involved:
1. Whether the conversion of the Honing Machine amounted to the manufacture of a new machine.
2. Determination of the assessable value for the purposes of central excise duty.

Issue-wise Detailed Analysis:

1. Whether the conversion of the Honing Machine amounted to the manufacture of a new machine:

In this case, M/s. Gehring India converted a Honing Machine initially used for honing brake drums to also hone cylinder blocks. The Assistant Collector of Central Excise, Kanpur, determined that this conversion constituted the manufacture of a new machine. This view was upheld by the Collector of Central Excise (Appeals), Allahabad, who agreed that the processes applied by the appellants amounted to manufacturing. The critical consideration was whether the goods were cleared in the same form as they were brought into the factory. Since the machine's capacity and capability had changed significantly, it was concluded that a new machine had come into existence, thus constituting a manufacturing process.

2. Determination of the assessable value for the purposes of central excise duty:

The Assistant Collector of Central Excise, Kanpur, initially determined the assessable value of the machine to be Rs. 96,26,576.40, including the landed cost of the original machine, material expenses for modification, and service charges. However, on appeal, the Collector of Central Excise (Appeals), Allahabad, held that the original cost of the machine should not be included in the assessable value. Instead, the depreciation value of the machine should be considered, along with the material expenses for modification and service charges. The matter was remanded to the Assistant Collector of Central Excise for re-determination of the assessable value based on this depreciation value.

Additional Considerations:

- Rule 173H of the Central Excise Rules, 1944: The appellants brought the machine into their factory under Rule 173H, which allows for the re-making, refining, reconditioning, or repairing of excisable goods without it amounting to manufacture, provided the goods are cleared in the same form. However, in this case, the machine was not cleared in the same form, thus constituting manufacture.

- Packing Charges: The adjudicating authority had referred to packing charges of Rs. 50,000, but these were not included in the assessable value. The Collector of Central Excise (Appeals) and the Tribunal confirmed that packing charges should not be considered in the assessable value.

- Tribunal's Decision in Refco Icematic Co. Case: The appellants cited a Tribunal decision stating that the assessable value should be arrived at after deducting the duty element even for fully exempted goods. However, this case law was deemed not applicable to the present facts since the appellate authority had already adjusted the assessable value by considering the depreciation value instead of the full landed cost.

Conclusion:

The Tribunal upheld the view of the Collector of Central Excise (Appeals), Allahabad, that the conversion of the Honing Machine constituted manufacture and that the assessable value should be based on the depreciated value of the machine plus material and service charges. The appeal was rejected with the modification that packing charges should not be included in the assessable value.