2014 (3) TMI 83 - AT - Central Excise

Waiver of pre-deposit of duty - Whether the process of stuffing, soldering of components carried out by the applicants on the PPCBs supplied by the customers of the applicant on job work basis would amount to manufacture under Section 2(f) of the Central Excise Act, 1944 - Held that - It appears from the applicant s own submission that both the items are similar in nature. It is contended by the learned advocate that they paid duty which are directly marketed. In other cases, the PPCBs cleared for the purpose of use in R & D, they have not paid any duty. In the case, where the PPCBs were directly not marketed, the applicant paid service tax. The main contention of the applicant is that they have paid service tax and therefore demand of central excise duty on the same process cannot be sustained. We are unable to accept this submission. Prima facie, we find that both the processes are virtually similar. After considering the submissions of the learned advocate that they have already paid service tax of about Rs.68 lakhs and it appears from the show-cause notice that the value of the materials could not be ascertained by both the parties - Conditional stay granted.

Summary

Issues:
Determining whether the process of stuffing and soldering of components on Populated Printed Circuit Boards (PPCBs) amounts to manufacture under Section 2(f) of the Central Excise Act, 1944.

Analysis:
The case involved an application for waiver of pre-deposit of duty amounting to Rs.8,45,99,282/- along with interest and penalties for the period September 2005 to November 2010. The applicants, as manufacturers of PPCBs, were engaged in two types of activities: one where they received PCBs from customers and cleared PPCBs after paying duty, and the other where they processed PCBs supplied by customers for stuffing and soldering of components on a job work basis. The main contention was whether the latter process constituted manufacture under the Central Excise Act. The applicants argued that the processes were different, with the second type being akin to a job work scenario, and any duty liability should rest with the principal manufacturer. Conversely, the Revenue contended that both processes were similar and duty was payable by the applicants, alleging suppression of facts to evade payment.

The Tribunal examined the statement of the Managing Partner of the applicant-company, which detailed the manufacturing process involving manual assembly and the use of a mini reflow machine for stuffing and soldering components on PCBs. The statement clarified the distinction between manual assembly and assembly by machine, emphasizing that the final product was a PPCB. The customers included R&D units and original equipment manufacturers. The statement also addressed the invoicing process for assembly charges and excise duty payment based on the type of customer. The Tribunal noted that the processes for both types of products were similar, with the applicants paying duty for directly marketed PPCBs but not for those used in R&D. Despite the argument that service tax had been paid, the Tribunal found both processes to be virtually identical.

Ultimately, the Tribunal directed the applicant to deposit Rs.1,00,00,000/- within eight weeks, with the balance duty, interest, and penalty on the Managing Partner to be waived upon compliance. The recovery of the remaining amount was stayed pending the appeal's disposal, highlighting the need for duty payment on the processes involving stuffing and soldering of components on PPCBs, even if used for R&D purposes.