2011 (8) TMI 951 - AT - Central Excise

Conversion of M.S. rounds to bright bars not manufacturing; no excise duty. Limitation period inapplicable. Order set aside.

GEETA BRIGHT BAR WORKS PVT. LTD. Versus COMMISSIONER OF C. EX., MUMBAI-V

The Tribunal concluded that the process of converting M.S. rounds into M.S. bright bars through cold drawing does not amount to manufacture as no new ... Demand of duty, interest and penalty - whether activity of pickling, cutting, drawing and polishing have emerged a new distinct commodity except the conversion of M.S. round into bright bars – Held that:- in the case of Vee Kayan Industries (1994 - TMI - 44247 - SUPREME COURT OF INDIA - Central Excise) M.S. round into bright bars does not amount to manufacture, the same has been clarified by the Board Trade Notice No. 15/2004, dated 16-6-2004. The activity of drawing of M.S. round bars into bright bars is an activity of manufacture has specifically brought into statute book w.e.f. 18-4-2006. Therefore we are concluding that during the impugned period i.e. from 1-4-1994 to 30-9-1995, the activity undertaken by the appellants i.e. conversion of M.S. round bars into bright bars through an activity of pickling, cutting, drawing and polishing does not amount to manufacture. When there is no manufacturing activity, no excise duty is payable. Therefore, the demands are not sustainable, when demand are not sustainable, the question of demanding interest and imposition of penalty also does not arise. Therefore the impugned order is set aside. The appeals are allowed Issues Involved:1. Whether the process of converting M.S. rounds into M.S. bright bars through cold drawing amounts to manufacture.2. Applicability of extended period of limitation for issuing the show-cause notice.3. Liability of interest and penalties if the activity is deemed to be manufacture.Issue-wise Detailed Analysis:1. Whether the process of converting M.S. rounds into M.S. bright bars through cold drawing amounts to manufacture:The core issue is whether the conversion of M.S. rounds into bright bars through processes such as pickling, cutting, drawing, and polishing amounts to manufacture. The Tribunal referred to the earlier judgment in the case of Vee Kayan Industries v. C.C.E. (1996), where the Apex Court held that 'transformation of round bars into bright bars does not amount to manufacture as no new product emerges.' The Tribunal noted that the Revenue failed to provide evidence that the conversion resulted in a new, distinct commodity. The same view was upheld in the case of Technoweld Industries Ltd., where the Apex Court ruled that 'the process of drawing wires from wire rods does not amount to manufacture.' Therefore, the Tribunal concluded that the conversion of M.S. rounds into bright bars does not amount to manufacture, as no new product with a distinct name, character, or use emerges from the process.2. Applicability of extended period of limitation for issuing the show-cause notice:The appellant argued that the period involved was from 1-4-1994 to 30-9-1995, and the show-cause notice was issued on 26-3-2009, which is beyond the normal period of limitation. The Tribunal agreed with the appellant, stating that since the issue of whether the activity amounts to manufacture was in dispute, the extended period of limitation is not invokable. The Tribunal emphasized that the lack of clarity and the existence of conflicting judgments on the matter justified the appellant's position.3. Liability of interest and penalties if the activity is deemed to be manufacture:Given that the Tribunal concluded that the conversion of M.S. rounds into bright bars does not amount to manufacture, it followed that no excise duty is payable. Consequently, the Tribunal ruled that the demands for interest and penalties are also not sustainable. The Tribunal relied on the clarification provided by the Board through Trade Notice No. 15/2004, which stated that the activity of drawing bright bars from wire rods does not amount to manufacture prior to the introduction of a specific entry in the statute book on 18-4-2006.Conclusion:The Tribunal set aside the impugned order, concluding that during the period from 1-4-1994 to 30-9-1995, the activity of converting M.S. rounds into bright bars through pickling, cutting, drawing, and polishing does not amount to manufacture. As a result, no excise duty is payable, and the demands for interest and penalties are not sustainable. The appeals were allowed with consequential relief.