2024 (11) TMI 1176 - AT - Central Excise

Levy of Excise duty on the job work goods supplied to the customer - activity of cutting, welding, bending etc. for manufacture of parts of structure - Process amounting of amount to manufacture - HELD THAT - There are catena of judgments, some of the judgments are contrary. Therefore, it clearly shows that the issue was highly debatable and there is a very thin difference between whether the activity amounts to manufacture or otherwise. Therefore, in such case, the matter can be decided only on the ground of limitation without giving final conclusion to the merit of the case. As regard the issue raised by the appellant for demand being time barred, on careful examination of the facts and record, it is found that it is not a case where the appellant have out rightly evaded the duty, firstly, the activity involved is whether manufacture or otherwise covered by the various judgments cited by the Learned Counsel wherein, in various judgments, it is held that the activity of cutting, welding, bending etc. do not amount to manufacture. At the same time there are contrary judgments to each other and the matter was decided by the Larger Bench in the case of MAHINDRA MAHINDRA LTD. VERSUS CCE., AURANGABAD, CHANDIGARH, KANPUR CHENNAI 2005 (11) TMI 103 - CESTAT, NEW DELHI . However, the specific activity has to be looked into in each and every case, then only this judgment can be applied. Therefore, in this undisputed fact the issue involved is of interpretation of the term manufacturer. Therefore, no malafide intention can be attributed to the appellant. Secondly, the appellant who were registered under service tax and discharging the service tax liability on the very same activity which as per department is amount to manufacture. Once the appellant have under bonafide belief assessed the activity as service and paid the service tax and have been filing their ST-3 return regularly. It was open to the department to question about the nature of activity and can raise the demand if at all they are of belief that the activity is amount to manufacture well within the normal time. In this position, nothing prevented the department to issue show cause notice within the normal period. Therefore, since there is absolutely, no suppression of fact and malafide intention, the demand is hit by limitation. The period of demand is 2011-2013 and show cause notice was issued almost after 3-4 years i.e. on 18.01.2017. Accordingly, entire demand is beyond the normal period. Hence, the same is not sustainable on the ground of limitation itself. Since, the appellant have no malafide intention and they have not suppressed any fact from department with intent to evade payment of duty. For the same reason, no penalty under Section 11 AC is imposable. Accordingly, the demand is set aside only on the ground of limitation without giving the conclusive findings on the merit i.e. whether the activity amounts to manufacture and otherwise. The impugned order is set aside, appeals are allowed.

Summary

Issues:
Whether the activity of cutting, welding, bending, etc. carried out by the appellant amounts to manufacture, leading to liability for excise duty.

Analysis:
The appellant was registered under excise and service tax for job work involving cutting, welding, bending, etc. using raw materials supplied by customers. The department claimed the activity amounted to manufacture, imposing excise duty. The appellant argued that the activity did not constitute manufacture, correctly paying service tax instead. They contended that duty, if any, was covered by Cenvat Credit of the customer, making it revenue neutral. The appellant's belief that the activity was a service, not manufacture, was supported by case law. The appellant's compliance with service tax obligations showed no malafide intent or suppression of facts. The demand for excise duty was deemed time-barred due to the extended period involved, as the show cause notice was issued after 3-4 years, beyond the normal period. Consequently, the demand was set aside based on limitation grounds without a final determination on whether the activity constituted manufacture.

The Tribunal found the issue of whether the appellant's activities amounted to manufacture to be highly debatable, with conflicting judgments. Given the interpretative nature of the term "manufacturer," no malafide intent was attributed to the appellant for paying service tax instead of excise duty. The appellant's consistent filing of ST-3 returns and lack of suppression of facts further supported the finding that the demand was time-barred. The absence of malafide intent also precluded the imposition of penalties under Section 11 AC. As a result, the impugned order was set aside, and the appeals were allowed on the grounds of limitation, without conclusively determining the manufacturing aspect of the appellant's activities.

This judgment highlights the importance of interpreting statutory provisions and case law in determining tax liabilities. The Tribunal's emphasis on the absence of malafide intent and the timeliness of the demand serves as a reminder of the legal principles governing tax disputes. The decision underscores the significance of compliance, belief in good faith, and the application of legal precedents in resolving contentious tax issues.