1999 (8) TMI 558 - AT - Central Excise

Summary

Issues Involved:
1. Classification of the product as "transmission kit."
2. Whether the activities undertaken amount to "manufacture."
3. Applicability of extended period of limitation for duty demand.
4. Correctness of duty quantification and valuation.
5. Eligibility for Modvat Credit.

Summary:

1. Classification of the Product as "Transmission Kit":
The department classified the items packed together as a "transmission kit" under sub-heading 84.17, demanding duty for the period from 1-10-1992 to 31-8-1997. The appellants contended that there is no such item as "transmission kit" known and identifiable, and the individual products cannot be construed as intermediate products for the alleged "transmission kit."

2. Whether the Activities Undertaken Amount to "Manufacture":
The appellants argued that procuring sprockets, testing, branding, and packing them with automotive chains and connecting links does not amount to the manufacture of a "transmission kit." The Tribunal held that the activities of testing and packing do not change the items into a new product, and the products remain the same. The judgment of the Andhra Pradesh High Court in the case of XL Telecom was cited, which held that putting together duty-paid articles in a kit does not amount to manufacture.

3. Applicability of Extended Period of Limitation for Duty Demand:
The appellants argued that the demand for the period 1-10-1992 to 31-8-1997 is time-barred as the show cause notice was issued on 5-11-1997, and they had no intention to evade payment of duty. The Tribunal did not need to examine this issue as the appeal was allowed on the ground that no new goods had arisen for the purpose of excisability.

4. Correctness of Duty Quantification and Valuation:
The appellants contended that the quantification is incorrect since charging of "transmission kit" under heading 87.14 cannot arise. The Tribunal agreed, noting that the value of bought-out items cannot be added to the assessable value when packed along with automotive pistons and gudgeon pins, as held in the case of India Piston.

5. Eligibility for Modvat Credit:
The Commissioner rejected the plea of valuation on quantification and the benefit of Modvat Credit claimed on duty-paid automotive chains on the ground that no declaration had been filed. However, this issue became moot as the Tribunal held that no new goods had arisen for the purpose of excisability.

Conclusion:
The Tribunal allowed the appeal, holding that the activities of testing and packing do not amount to the manufacture of a new product. Therefore, the classification as "transmission kit" and the duty demand were set aside. The appeal succeeded on the short question of "manufacture" itself.