1999 (10) TMI 323 - AT - Central Excise

Summary

Issues involved: Whether filter heads and filter elements were manufactured by the appellant and whether Central Excise Duty was chargeable from them.

Issue 1: Manufacture of filter heads and filter elements
The appellant, M/s Universal Filteration Co., claimed they were not manufacturing filter heads and filter elements but were involved in the manufacturing of lube oil filter assembly, consisting of three parts: filter heads, filter elements, and oil shell. The appellant argued that they procured raw materials for filter elements from the market and sent them to job workers for manufacturing. The Department alleged that the filter heads and filter elements were manufactured on behalf of the appellant by hired labor, citing invoices from a mechanical works company for labor charges. The Collector's findings stated that the appellants did not provide evidence that they manufactured the filter elements, and the Department failed to prove otherwise. The Appellate Tribunal observed that the Department did not discharge the onus of proving that the filter elements were manufactured by the appellants, especially since the appellants did not seek relaxation under Rule 51A of the Central Excise Rules for bringing the goods into the factory. The Tribunal also highlighted that the raw material supplier is not considered the manufacturer, and the person who actually manufactures the goods is liable to pay duty. Relying on legal precedents, the Tribunal set aside the impugned order and allowed the appeal, emphasizing the distinction between manufacturing and labor work.

Issue 2: Classification of filter heads and filter elements
Regarding the classification of filter heads and filter elements, the Department argued that machining of castings does not alter their essential character, and the filter heads remain filter heads. The Department also contended that the filter elements were not proven to be received from other manufacturers and that the appellants did not obtain permission under Rule 51A for bringing the filter elements into the factory. The Tribunal, however, disagreed with the Department's arguments, noting that after machining, castings get converted into machine parts, indicating a change in essential character. The Tribunal further emphasized that the Department failed to establish that the outside workers were hired labor and reiterated that the raw material supplier is not considered the manufacturer. By referencing legal cases and the Supreme Court's decision in a similar matter, the Tribunal concluded that the appellants were not liable to pay duty on the filter heads and filter elements, ultimately allowing the appeal and setting aside the impugned order.

In conclusion, the Appellate Tribunal's judgment in the appeal filed by M/s Universal Filteration Co. revolved around the issues of whether the filter heads and filter elements were manufactured by the appellants and whether Central Excise Duty was chargeable from them. The Tribunal carefully analyzed the arguments presented by both parties, considered legal precedents, and emphasized the distinction between manufacturing and labor work in determining liability for excise duty. Ultimately, the Tribunal ruled in favor of the appellants, setting aside the impugned order and allowing the appeal based on the lack of evidence proving that the appellants were the manufacturers of the filter heads and filter elements.