2019 (5) TMI 1168 - AT - Central Excise

Process amounting to manufacture or not - activities of cutting and corrugation of GP Coils/Sheets received from various parties - case of Department with regard to corrugation of sheets, is that, it was held that such activity undertaken by the respondent amounts to manufacture, as a new entity emerges after such activity, which is distinct in name, use and character - extended period of limitation. The impugned order has dropped the proposed duty demands for the said goods manufactured during February 2012, holding that proposal for recovery was made beyond the normal period of one year and thus, the show cause proceedings initiated were barred by limitation of time. HELD THAT - The issue, as to whether, the activity of corrugation amounts to manufacture or not was highly contentious and there were divergent views by different judicial forums and finally the issue gets settled by the Hon ble Punjab Haryana High Court, in the case of Hansa Metallics Ltd. Vs. Union of India, 2001 (2) TMI 138 - HIGH COURT OF PUNJAB HARYANA AT CHANDIGARH , holding that process of corrugation of plain metallic sheets and galvanized sheets undertaken by the petitioner amounts to manufacture, as a new commercial product having different identity and use come into existence. Even after pronouncement of the said judgment by the Hon ble Punjab Haryana High Court, the Hon ble Supreme Court, in the case of Vardhman Industries Ltd. Vs. CCE, Chandigarh, 2008 (3) TMI 51 - SUPREME COURT , while remanding the matter for re-adjudication, have directed the original authority for passing of denovo order uninfluenced by the judgment of the said High Court passed in the case of Hansa Metallics Ltd., keeping the question of law open as to whether, corrugation amounts to manufacture or not. Thus, we accept the submissions of the respondent that non-payment of the duty amount was due to the bona fide belief that the activity will not amount to manufacture. The law is well settled by the Hon ble Apex Court, in the case of Chamundi Die Cast Vs. CCE, Banglore 2007 (5) TMI 55 - SUPREME COURT , Gopal Zarda Udyog Vs. CCE, New Delhi 2005 (9) TMI 83 - SUPREME COURT , Ugam Chand Bhandari Vs. CCE, Madras 2004 (5) TMI 73 - SUPREME COURT that when the assessee acted under bonafide belief on a particular aspect and there were difference of opinion in the department on such aspect, the extended period of limitation cannot be invoked especially, when the activities of the assessee were in the knowledge of the department officers, who regularly visit its factory. The extended period of limitation cannot be invoked - appeal dismissed - decided against Revenue.

Summary

Issues:
- Whether the activity of corrugation amounts to manufacture.
- Whether the extended period of limitation can be invoked for confirmation of proposed duty demand.

Analysis:

Issue 1: Activity of Corrugation Amounts to Manufacture
The case involved a dispute regarding whether the activity of corrugation of Galvanized Plane Coils into Galvanized Corrugated Sheets amounts to manufacture under Section 2(f) of the Central Excise Act, 1944. The Commissioner of Central Excise held that corrugation constitutes manufacture as it results in a new entity with distinct characteristics. The respondent argued that they believed in good faith that the activity did not amount to manufacture, citing previous judgments and the downstream nature of the product. The Tribunal referred to conflicting judicial opinions and highlighted the decision of the Punjab & Haryana High Court, which affirmed that corrugation does amount to manufacture. The Tribunal ultimately sided with the respondent, emphasizing the bona fide belief and the lack of clarity in the law regarding corrugation as a manufacturing process.

Issue 2: Extended Period of Limitation
The Revenue contended that the extended period of limitation should have been invoked due to alleged fraud and suppression by the respondent. However, the Adjudicating Authority, based on the documents submitted by the respondent and the knowledge of the department regarding the manufacturing activities, held that the extended period of limitation was not applicable. The Authority relied on the judgment of the Supreme Court in the Nizam Sugar Factory case to support this decision. The Tribunal upheld the Authority's decision, emphasizing that when there is a genuine belief and differing opinions within the department, the extended period of limitation cannot be invoked. The Tribunal cited several Supreme Court cases to support this principle.

In conclusion, the Tribunal dismissed the appeal filed by the Revenue, affirming the decision of the Adjudicating Authority to drop the proposed duty demand and ruling that the extended period of limitation could not be invoked. The cross objection filed by the respondent was also disposed of accordingly.