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TMI Blog2018 (3) TMI 167X X X X Extracts X X X X X X X X Extracts X X X X ..... the process undertaken by them does not amount to manufacture. 2. The facts of the case are that the appellant purchased engine/pump/base frames from the various suppliers. After procuring all these things, the appellant undertook inspection and testing in respect of the parts for proper alignments of pump set on engines, pump and base frames. After inspection is over and ascertaining that it is ok all the three inputs purchased by them up to satisfaction, the appellant packs all three items in a master carton with logo/model number and name of their company and thereafter, they were dispatched to the godown/depots for sale. The case of the Revenue is that the process of alignment and testing/inspection does not amount to manufacture and as the appellant has sold all these parts as such after the re-packing, therefore, they are not entitled to avail cenvat credit on all these inputs. It was also purposed that whatever amount they have collected is payable to the department under Section 11(D) of the Act, penalties under Rule 15(2) of the Cenvat Credit Rules, 2004 were also purposed. The matter was adjudicated and it was held that the process undertaken by the appellant does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts are not in dispute that the appellant are procuring engines, pumps and base frames from various suppliers. These items were inspected by the appellant for proper alignment of engine, pump and base frames and all these items are sold all together. As all these items are sold by the appellant together as pump sets, therefore, engine, pump and base frames are not sold as such by the appellant, therefore, the new product has come into existences after inspection and alignment done by the appellant, therefore, we hold that the activity undertaken by the appellant amounts to manufacture. Further we find that Note 6 to Section XVI of Central Excise Tariff Act which is extracted here as under: 6. In respect of goods covered by this Section, conversion of an article which is incomplete or unfinished but having the essential character of the complete or finished article (including blank that is an article, not ready for direct use, having the approximate shape or outline of the finished article or part, and which can only be used, other than in exceptional cases, for completion into a finished article or part), into complete or finished article shall amount to manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed upto specified gravity and cleared them as final product on payment of duty. The case of the Revenue is that the appellant is receiving batteries and selling them as batteries only. Therefore, the activity undertaken by the appellant does not amount to manufacture. Consequently, the appellant is not entitled to take Cenvat Credit on semi finished batteries received by them from sister units. Therefore, proceedings were initiated against the appellant to deny Cenvat Credit on their input. The matter was adjudicated. Demand was confirmed by denying Cenvat Credit along with interest and penalty was also imposed. Whereas this Tribunal observed as under: 9. Semi finished/incomplete batteries received by the appellant and by the process undertaken by the appellant have become complete batteries/marketable. Therefore, the activity undertaken by the appellant is squarely covered by the section Note 6 of Section 16 of Tariff Act, 1985. Therefore, we hold that activity undertaken by the appellant amounts to manufacture. Therefore, they have rightly taken the Cenvat Credit on semi finished/incomplete batteries received from their sister unit to do the process making them market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot even been proposed in the show cause notice and hence the Commissioner could not go beyond the proposal in the show cause notice. He relied on the case laws Prabhas Chandra Biswas V. CCE - 2012 (282) ELT 456 (Tri. Kol.) and Grapco Industries Ltd. Vs. - 2002 (149) ELT 932 (Tri. Del.) 13. The Ld. AR reiterated the finding in the impugned order of the adjudicating authority. 14. Heard the rival submissions and examined the records. I find that the activity of the appellants is summarised in the paragraph 3 of the show cause notice, which is extracted below: 3. This unit was found situated in a small portion in front of store room during the visit, pump, engine and frames were found lying in their original packing. (These three items were repacked in a bigger packet under the brand name of Usha Portable Pump Set Powered by Honda Engines). In this regard statement of Sh. R.C. Duria, Manager (Annexure- A') was recorded on the spot under Section 14 of the Central Excise Act In his statement Sh. R.C. Duria, Manager stated that he had been working as Manager and looking after production of KPS pumps sets since October, 2006. He further stated that there were three mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have the essential character of the complete or finished article. The contention that the engines, pumps and frames all have the essential character of the pump is clearly erroneous and hence not tenable. While incomplete pumps may be having essential character, it cannot be said that engine and frame have essential character of P.D. Pumps. The latter are just components of P.D. Pumps. Further, the process of converting three components into complete or finished article, namely, P.D. Pumps does not take place in the factory where inspection is only done selectively, but at the location, where pumps, engines and frames are assembled and converted into a complete or finished pump. Hence, process of manufacture takes place at the place of installation and use. 16. The appellant have relied upon the case laws of Westron Refrigeration Pvt. Ltd (Supra) and Indo Asian Fuse Gear Ltd (Supra). In the latter case, the process carried out was calibration and testing in order to make MCBs a marketable product, which was deemed by the Tribunal to be covered under Note 6 of Section XVI of the Central Excise Tariff Act. In the case of Western Refrigeration Pvt Ltd. (Supra), this Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the CBEC Circular NO.224/58/96-CX dated 26.06.1996 (Supra). The perusal of the circular shows that the said circular does not dealt with the question of manufacture and is only in relation to classification of the composite machines and their eligibility under Notification No.56/95-CE. Hence, the question of whether putting together of three components amounts to manufacture has not been upheld by the said circular. 20. The appellants have contended that they should not be penalised under Rule 15(1) of the Cenvat Credit Rules, as there was no suppression of material facts on their part and they have filed their ER-1 returns regularly. They have also argued that the show cause notice proposes penalty under Rule 15 (2) of the Cenvat Credit Rules, but the adjudicating authority has imposed the penalty under Rule 15 (1) of the Cenvat Credit Rules. I find that the Commissioner has ruled out fraudulent intent and suppression. However, it is seen from para 12 of the show cause notice that liability for penal action was proposed under Rule 15 (1) as well as Rule 15 (2) of the Cenvat Credit Rules. Hence, the contention of the appellant that Rule 15 (1) was not proposed is not correct. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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