2023 (5) TMI 597 - AT - Central Excise

Recovery of CENVAT Credit alongwith interest and penalty - Process amounting to manufacture or not - processing of steel Tubular Pole - Section 2(f) of the Central Excise Act, 1944 - HELD THAT - The Appellant purchased and also manufactured in their factory, pipes and tubes of various sizes and lengths and those were converted into Steel Tubular Poles by cutting into required sizes and required lengths. Then they are swaged to feed into their next lower sized pipe. After swaging, welding is done and then a plate is fixed at the time of welding process. The swaged pipes are holed at required places and after that painting etc. are done to make the pole marketable. It is the contention of the Appellants that they used mild steel Black Pipes and MS plates, which are major raw materials. The Ld.Commissioner has wrongly distinguished the judgement of the Hon ble Supreme Court in the case of M/S. PRACHI INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH 2008 (3) TMI 25 - SUPREME COURT relied upon by the Appellant. The facts of the present case are squarely covered by the above-mentioned decision of the Hon ble Supreme Court - the Ld.Commissioner has not only misunderstood the judgement of the Hon ble Supreme Court, but has also wrongly interpreted the ratio laid down by the Hon ble Supreme Court in the impugned order. There is no dispute that MS Black Pipes manufactured by the Appellant in their own factory are first subjected to the process of swaging and later welded to make the desired length of pipes. Their Lordships in the judgement of Prachi Industries have distinguished the ratio of HINDUSTAN POLES CORPORATION VERSUS CCE, CALCUTTA 2006 (3) TMI 2 - SUPREME COURT . The facts in Hindustan Poles case related to mere joining of pipes by the process of welding only and no swaging of pipes was involved. By applying the ratio of the Hon ble Supreme Court in Prachi Industries, the processes of swaging and welding carried out by the Appellant results into manufacture of Tubular Poles and pipes of different lengths within the meaning of Section 2 (f) of Central Excise Act, 1944. The impugned order cannot be sustained and is therefore set aside - Appeal allowed.

Summary

Issues Involved:
The issue involved in the judgment is whether the processing of steel Tubular Pole amounts to manufacture within the meaning of Section 2(f) of the Central Excise Act, 1944.

Comprehensive Details:

Issue 1: Processing of Steel Tubular Pole

The Appellant availed CENVAT Credit on inputs used in the manufacture of final products and availed exemption through refund of duty paid. The department alleged that the process of joining three pipes to make poles did not amount to manufacture, leading to the demand for payment of duty. The Appellant contended that swaging and welding processes were essential in manufacturing Steel Tubular Poles. The Appellants cited the decision of the Hon'ble Supreme Court in Prachi Industries case, where swaging was considered a manufacturing process. The Adjudicating authority ordered recovery of CENVAT Credit and imposed penalties. The Appellant appealed against this order.

Issue 2: Judicial Interpretation

The Tribunal found that the Ld. Commissioner wrongly distinguished the Prachi Industries case relied upon by the Appellant. The Tribunal noted that swaging resulted in a lasting change to the pipes, creating a distinguishable product. The Tribunal emphasized the importance of the die in the swaging process, which imparts different shapes to the workpiece. The Tribunal clarified that the Hindustan Poles case, which dealt with welding only, was not applicable to the present case involving swaging and welding processes. By applying the ratio of the Prachi Industries case, the Tribunal concluded that swaging and welding by the Appellant constituted manufacturing under Section 2(f) of the Central Excise Act, 1944.

Decision:

The Tribunal set aside the impugned order, ruling in favor of the Appellant. The Appeal was allowed based on the interpretation of the manufacturing processes involved in creating Steel Tubular Poles. The Tribunal found that the processes of swaging and welding transformed the raw materials into marketable products, meeting the criteria of manufacture under the Central Excise Act, 1944.