2013 (11) TMI 1116 - AT - Central Excise

Activity Manufacture or not - Putting electrolytes and charging of the battery of two wheelers - Held that - The electrolyte is nothing but a liquid which contains ions and can be decomposed by electrolysis - After putting the electrolyte appellants are charging the batteries before delivery to the customer - It cannot be said that this process undertaken by the appellant is conversion incomplete or unfinished article i.e Two wheelers into complete or finished two wheelers Decided in favour of Assessee.

Summary

Issues:
Whether putting electrolytes and charging the battery of two-wheelers amounts to manufacture as per the Central Excise Act, 1944. Whether the activity undertaken by the appellant can be considered as completion or conversion into complete or finished goods. Whether the demands made by the revenue are sustainable based on Section Note 6 of Section XVII of the First Schedule to the Central Excise Tariff Act.

Analysis:

1. Manufacture under Central Excise Act, 1944:
The appellants, dealers of motorcycles and scooters, receive duty paid two-wheelers from manufacturers. The revenue contends that putting electrolytes and charging the battery is incidental to the completion of two-wheelers, thus constituting manufacture under section 2(f) of the Act. The revenue also relies on Section Note 6 of Section XVII of the First Schedule, which states that converting an incomplete article into a complete one amounts to manufacture. The demands were confirmed on this basis.

2. Activity as Completion of Goods:
The appellants argue that they only fill the batteries with electrolytes and charge them upon receiving the two-wheelers. They claim this activity does not amount to converting incomplete goods into complete ones. The lower authority and revenue argue that the appellants render the two-wheelers complete by putting electrolytes and charging the batteries, justifying the demands made.

3. Precedents and Interpretation of Law:
The appellants cite instances where similar demands were dropped by other Commissioners of Central Excise. The tribunal notes that the manufacturers clear two-wheelers with batteries without electrolyte, and the appellants merely add electrolytes and charge the batteries. The tribunal finds that this process does not convert incomplete articles into finished goods. The tribunal also considers the nature of electrolyte and the fact that the manufacturers paid duty on complete two-wheelers.

4. Decision and Ruling:
The tribunal rules in favor of the appellants, setting aside the impugned orders and allowing the appeals. The tribunal concludes that the activity undertaken by the appellants does not amount to manufacturing as defined by the Central Excise Act. The tribunal highlights that the appellants receive duty paid two-wheelers in a complete and finished condition from the manufacturers, and the process of adding electrolytes and charging batteries does not constitute conversion into finished goods. The tribunal also notes the dropped demands by other authorities and allows the appeal on its merits.

In conclusion, the tribunal's judgment clarifies the interpretation of the Central Excise Act regarding activities like putting electrolytes and charging batteries in two-wheelers. The ruling provides guidance on what constitutes manufacturing under the Act and highlights the importance of considering specific processes and precedents in making such determinations.