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TMI Blog2023 (10) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... ATE GENERAL OF CENTRAL EXCISE, CHAIRMAN CENTRAL BOARD OF EXCISE CUSTOMS DEPARTMENT OF REVENUE AND THE JOINT COMMISSIONER OF CENTRAL EXCISE, CHENNAI II [ 2021 (10) TMI 1029 - MADRAS HIGH COURT] , it is held that the activity does not amount to manufacture. The demand cannot be sustained. The issue on merits is answered in favour of the assessee and against the Revenue. Time Limitation - HELD THAT:- The department has derived the figures from the income tax returns filed by the appellant. Several audits were conducted as the appellant is registered with service tax commissionerate. Further the issue is purely interpretational in nature. There is no evidence that appellant has suppressed facts with intent to evade payment of duty. Taking these aspects in to consideration, the show cause notice issued invoking the extended period cannot sustain. The issue on limitation is answered in favour of assessee and against the department. The impugned order is entirely set aside. The appeals are allowed. - HON BLE MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL) And HON BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) Ms. Vishnu Priya, Advocate For the Appellant Mr. Harendra Sing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , interest and penalties. However, the penalty of one crore imposed on M/s. Susila Girisan was reduced to be Rs.10 lakhs. Aggrieved by such order, the appellants are now before the Tribunal. 4. The Ld. counsel Ms. Vishnu Priya appeared and argued on behalf of appellants. It is submitted that:- M/s. Medical Research Foundation (also known as Sankara Nethralaya ) (hereinafter referred to as the Appellant No.1 ) is a registered Society holding Registration No.25/1978 under the provisions of the Tamil Nadu Societies (Registration) Act, XXI of 1960. It is a Trust registered under Section 12AA of the Income Tax Act, holding Approval No.1146-III(51)/1978, dated 20.09.1978 issued by the Commissioner of Income Tax. 4.1. As a medical institution, it is also registered with service tax and has been faithfully discharging service tax during the periods under the categories applicable on health services by Clinical Establishment, Information Technology Software Service, Commercial Training or Coaching, Technical Testing and Analysis Services and Business Support Services. Periodical service tax audits have also been conducted and accounts have been perused. While so, the SCN No.3/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgument the decision in the case of Ujjagar Paints Ltd., vs. Union of India 1988 (38) ELT 535 (S.C.) at para 7 was relied. 4.4.1 The Ld. Counsel drew support from the decision of the High Court of Rajasthan in Mehta Opticians Vs. The Assistant CTO dated 16.05.1994 as approved by Hon ble Supreme Court and reported (2009) 9 Section 309. In the aforesaid case, two questions arose for consideration before the Hon ble High Court of Rajasthan and before the Hon ble Supreme Court. The first question was, whether exempted product made out of two exempted inputs can be taxed? The Assessee contended that the frames and glasses were exempted from tax. The second contention of the assessee was that there was no manufacturing activity. Both contentions were approved by the Hon ble Division Bench of the Rajasthan High Court and later by the Hon ble Supreme Court in the decision reported in 2001 (9) SCC 309. In Para 2 of the aforesaid judgment, the Hon ble Supreme Court held all that an optician does is to fit the lens into a spectacle frame; it carries out no process of manufacture and no separate or distinct commodity emerges . These decisions are clear authorities for the position that f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssues (P) Ltd - 2005 (186) ELT 385 (SC) at para 19. 4.8. The Appellate Authority in para 8 of the impugned order has erred by relying upon the judgment in the case of M/s. Krishna Udyog Vs CCE, Lucknow reported in 2016 (343) ELT 252(Tri-All). In this regard, it is submitted by the Ld. Counsel that, in the aforesaid case, the input was Copper Wires and the output was PVC insulated winding wires and both were commercially distinct products and were also Marketable in the market, thereby satisfying the twin tests criteria for attracting excise duty. Whereas, in the present case twin tests criteria is not satisfied. 4.9. The Ld. counsel put forward arguments with regard to quantification of duty demand. The figures have been collected by the department from the income tax returns filed by appellant. During the course of the personal hearing on 23.05.2018 before the adjudicating authority, appellant had filed a reconciliation statement , indicating the break-up of the proposed demands as per Show Cause Notice. This statement has 8 Pages. In Page1, there is a tabular statement which is titled as break-up income reported as optical shop collections . In the audited ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht to have approached the department for clarification. Since the appellant did not seek clarification the extended period of limitation has been invoked by department. It is argued that this is not sufficient ground to invoke extended period. The Ld. counsel submitted that the demand for the period between July 2012 to April 2016 is completely barred by limitation (demand covered: Rs.79,25,817.28/-) and the period between May, 2016 to June, 2017 would fall within normal period (demand covered: Rs.30,25,558.06). The issue being a question of interpretation and the appellant being under bonafide that there was no manufacturing activity the demand invoking the extended period may be set aside. There is no willful suppression of facts with intent to evade payment of duty. 4.12. The authorities below have erred in imposing separate penalty on Ms. Susila Girisan. The provisions of Rule 26 cannot be made applicable to the present case since Appellant No.2 was not involved in transporting, removing or depositing or keeping or purchasing excisable goods. It is a settled law that rule 26 can be made applicable only when a person who deals with excisable goods knows that the said goods ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that fitting of the lens into the frames amounts to the activity of manufacture as defined in Section 2 (f). In para 9 of the Show Cause Notice, it is alleged that in workshops / laboratory of appellant, fitment of lenses to the frames are done by their lab technicians who are specially trained to work on the sophisticated instruments specially designed for the purpose. After fixing the lens in to the frames it becomes a distinct new product namely spectacles which is a marketable one. 9. The Ld. Counsel for appellant has been at pains to furnish various documents and explain the activity of the appellant is mere fitting of the powered lenses to the frames and argue that this activity does not amount to manufacture. The activity is explained as below: A patient is first given a prescription denoting the type of lens (power required). The patient then chooses the type of lens for which a bill is issued. They obtain such lens from other source (ESSILR, India Pvt. Ltd.) which supplies them the lens having the required power. Excise duty is collected by ESSILR from them while supplying the lens. The patient chooses the frame which is billed separately. These frames are purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k of cutting, edging, grinding of the lenses and fit the same in the frame to make a complete spectacle. For the aforesaid purposes, the following machines were used. . 18. The petitioner explained the manufacturing process at the time of the Inspection in the following terms: 1. The customer visits their premises 2. The customer selects a frame of his choice depending on brand, price, look, quality, etc. 3. The customer selects lenses of his choice depending on brand, price, look, quality, etc. 4. The customer either already has a prescription (details of power of lenses required) or he gets his eyes tested at the showroom. 5. If the customer wants to get his eyes checked, the optometrist of the showroom checks eyes of the customer, to get (ascertain) the power of lenses required for correcting his vision. 6. After getting the power of lenses/glass required for the customer, either they get the same from their store in the premises or if not available in the store, they place order to get the same from their warehouse at Bangalore. 7. Their technician, after getting the lenses of requisite power of standard shape and size, resizes t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso engage in sale of ready-made eye-wear that is purchased by customers, off-the-shelf. I am not, in these writ petitions, concerned with either of the aforesaid activities. 21. Post manufacture of the spectacle frames and lenses, the goods are sent separately to the petitioners' show rooms and what is undertaken in the show room is only an assembly of the prescription lenses and the spectacle frames wherein the lenses are merely mounted upon the frames, to result in a spectacle. 22. No doubt, the minute break-down of the machinery and the processes as described in the SCN indicate a chain of events requiring skill and sophistication, that appear very significant in magnitude and impact. However, the end result of all the processes only results in assembly of the lens with the frame. This, in my view, does not amount to manufacture. The process of assembly is bound to involve some amount of refining and fine-tuning of the individual components and this, by itself, will not tantamount to manufacture. In fact, most establishments engaged in selling eye-wear provide a gamut of services in this area including, having an optician in their employ or on call, and infrastruc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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