2000 (12) TMI 176 - AT - Central Excise

Summary

Issues:
1. Whether the activity undertaken by two units amounts to the manufacture of compressors on which duty is leviable.
2. Whether the two units are liable to penalty for not obtaining the requisite registration for the manufacturing activity.
3. Whether the penalties imposed on the units are justified under Sec. 6 of the Central Excise Act, 1944.

Issue 1: Activity as Manufacture of Compressors
The dispute revolved around whether the activity undertaken by two units, involving the repair of compressors, constituted the manufacture of new compressors on which duty was leviable. The Commissioner's orders alleged that the units had cleared goods without discharging the duty burden and failed to obtain necessary registrations. The Commissioner distinguished previous judgments but concluded that there was no positive evidence of manufacturing new compressors. The Tribunal analyzed the process undertaken by the units, which involved cutting open defective compressors, replacing parts, and dispatching them back. Expert affidavits supported these procedures, aligning with the show cause notices. Referring to past judgments, the Tribunal held that the activity did not amount to manufacturing new articles, following the Supreme Court's dismissal of similar appeals. Therefore, the Tribunal dismissed the Revenue's appeals, ruling that the process did not amount to manufacture, and duty payment was not required.

Issue 2: Liability for Penalties
Regarding the liability for penalties, the Commissioner imposed penalties on the units for not having a license or registration while dropping the duty demands. The units contested these penalties through cross-objections, arguing that since they were not engaged in manufacturing excisable goods, the requirement for licensing did not apply. The Tribunal agreed with the units, stating that as the activity did not constitute manufacturing, there was no need for licenses, and consequently, no basis for imposing penalties. Therefore, the Tribunal allowed the cross-objections, setting aside the penalties imposed by the Commissioner.

Final Decision
The Tribunal dismissed the Revenue's appeals, ruling that the repair activities of the units did not amount to manufacturing compressors on which duty was leviable. The Tribunal also allowed the units' cross-objections, setting aside the penalties imposed by the Commissioner. The decision was based on the findings that the repair processes did not constitute manufacturing as per relevant legal interpretations and precedents.