2016 (11) TMI 230 - AT - Central Excise

Manufacturing activity or not - emergence of new marketable product or not - Whether the main appellant is liable to Central Excise duty on the aluminium channels, brought from market on which they have carried out process like cutting, drilling and bending as per the requirement of the customers, will amount to manufacture or not - Held that - Such drilling and bending is also carried out at site of the customers depending upon the requirement of structure to be installed in the premises alongwith other civil work. In such situation, it is necessary to have a clear recording on the facts as to what type of new identifiable product emerges from aluminium sections brought in by the main appellant - In such a situation we are unable to agree with the findings of the Original Authority that a new and different article having distinct name, character or use as emerged in the present case. Regarding the second issue of addition of trading activity for the turnover of the appellants to arrive at the SSI exemption, the impugned orders held that the suppliers did not have manufacturing facility and the purchase and sale transaction of the wall mounted brackets is not acceptable - In this connection, the appellant contested that simply because the suppliers from whom they procured these materials do not themselves have manufacturing facility by itself cannot lead to a conclusion that the whole transaction is bogus - Appeal allowed by way of remand.

Summary

Issues:
1. Liability of Central Excise duty on processed aluminium channels
2. Treatment of trading activity in turnover calculation for SSI exemption

Analysis:

Issue 1: Liability of Central Excise duty on processed aluminium channels
The case involves three appeals against an order by the Commissioner of Central Excise, New Delhi, regarding the demand of Central Excise duty and penalties on the appellants. The main appellant, engaged in manufacturing wall mounted brackets, faced allegations that the process carried out on aluminium channels procured from outside amounts to manufacture, attracting Central Excise levy. The Original Authority ruled against the appellants, confirming a demand of ?97,86,809 and penalties. However, the Tribunal found the Original Authority's reasoning flawed. It was noted that the processes undertaken did not result in a distinct marketable product from the input used, as claimed by the Revenue. The Tribunal highlighted the lack of clear evidence on the emergence of a new identifiable product, setting aside the Original Authority's findings and calling for a fresh consideration based on factual and legal positions.

Issue 2: Treatment of trading activity in turnover calculation for SSI exemption
Regarding the addition of trading activity for turnover calculation, the impugned orders rejected the appellant's claim for exclusion based on the suppliers' lack of manufacturing facilities. The Tribunal disagreed with this reasoning, emphasizing that the absence of manufacturing facilities in suppliers does not automatically render the transactions as bogus. The Department's case was solely based on this premise, which the Tribunal found insufficient. Additionally, the denial of cross-examination of relevant individuals was deemed unsustainable, citing precedents emphasizing the need to follow proper procedures in such cases. Consequently, the Tribunal remanded the matter back to the Original Authority for a fresh decision, ensuring the appellants are given adequate opportunity to present their case and emphasizing adherence to procedural requirements as per legal precedents.

In conclusion, the Tribunal allowed the appeals by way of remand, directing a reevaluation of both issues with proper consideration of evidence and legal principles, ensuring a fair and thorough assessment in line with established legal procedures.