2016 (9) TMI 938 - AT - Central Excise

Manufacture - Whether the process of fitting electric motors to imported sewing machines amounts to manufacture within the meaning of 2 (f) of the Central Excise Act 1944 read with section note 6 to section XVI of the Central Excise Tariff Act and if the process amounts to manufacture, whether the resultant sewing machines are eligible for exemption under serial No. 201 and of notification No. 6/2002 - Held that - what has been imported is sewing machine even though the motor has not been fitted. After fitment of the motor it remains sewing machine. It cannot be said that the addition of motor has brought into existence any new article which has a character, name or use which is different from the components which have gone into it. Accordingly, it cannot be said that the addition of motor has brought into existence any new product and consequently no manufacture has taken place and hence, no liability for payment of Central Excise Duty arises in this case. Even if a view is taken that addition of motor results in a complete article liable for payment of excise duty, we find that it will be covered by the exemption given in serial No. 201 of notification 6/2000-CE. The exemption is available to those sewing machines which do not have an inbuilt motor. The concept of what constitutes a sewing machine with inbuilt motor has been examined by the Tribunals in many cases referred to the case of Gabbar Engineering Co. Vs. CCE, Ahmedabad 2009 (8) TMI 255 - CESTAT, AHMEDABAD . - Decided in favour of appellant

Summary

Issues:
1. Whether the process of fitting electric motors to imported sewing machines amounts to manufacture within the meaning of 2 (f) of the Central Excise Act 1944 read with section note 6 to section XVI of the Central Excise Tariff Act.
2. If the process amounts to manufacture, as above, whether the resultant sewing machines are eligible for exemption under serial No. 201 and of notification No. 6/2002

Issue 1:
The adjudicating authority linked section note 6 with section 2 (f) defining "manufacture" and concluded that fitting electric motors to imported sewing machines constitutes manufacturing. However, the appellate tribunal disagreed, citing the Supreme Court's definition of manufacture as a change resulting in a new article with a distinctive name, character, or use. The tribunal found that fitting motors did not create a new product but merely made the sewing machine operational through an alternate mode. Therefore, no new article emerged, and no manufacture occurred, exempting the appellant from excise duty liability.

Issue 2:
Regarding the eligibility for exemption under serial No. 201 of notification No. 6/2002, the tribunal analyzed the exemption for sewing machines without inbuilt motors. Relying on precedents such as Gabbar Engineering Co. v. CCE, Ahmedabad, and CC, Chennai v. Hi-Tech Machinery, the tribunal determined that fitting motors to sewing machines did not result in a new manufactured article requiring excise duty payment. Even if a new item was considered manufactured, it would still be eligible for the exemption under serial No. 201. Consequently, the tribunal set aside the impugned order and allowed the appeal in favor of the appellant.