2013 (4) TMI 433 - AT - Central Excise

Tribunal remands case to determine 'manufacture' under Central Excise Act

The Tribunal set aside the previous decision and remanded the case for a fresh determination on whether the process undertaken by the respondents ... 100% EOU allowed to make DTA clearances - Duty paid under proviso to Section 3(1) of the Central Excise Act, 1944 read with duty exemption under Notification No. 2/95-C - Duty free import of the inputs had been made - Manufacture U/s 2(f) of the Central Excise Act - Held that:- If the process undertaken by the respondent does not amount to manufacture, the stand of the department would be correct and the respondent would be liable to pay customs duty in terms of Condition No. 7 of the Exemption Notification No. 53/97-Customs - But if the process undertaken by the respondent amounts to manufacture, they would be liable to pay Central Excise duty under proviso to Section 3(1) of the Central Excise Act, 1944 read with duty exemption Notification No. 2/95-C.E - However, for deciding as to whether the process undertaken by the respondent amounts to manufacture or not, this matter has to be remanded to the original adjudicating authority. Condition No. 7 of the Notification No. 53/97-Cus., under which the duty free import of the inputs had been made, they would be required to pay customs duty on the inputs used in the manufacture of their finished products in an amount equal to the customs duty payable on the import of their finished products i.e. scrap The impugned order is set aside and the matter is remanded to the original adjudicating authority for de novo decision on this issue - The appeal is allowed by way of remand - The cross objection filed by the Respondent also stands disposed off. Issues:Rate of duty applicable on DTA clearances of scrap by a 100% EOU.Analysis:The case involved a dispute regarding the rate of duty applicable on the DTA clearances of scrap by a 100% EOU. The respondents, engaged in recycling old and damaged electric transformers, compressors, motors, etc., claimed their activity amounted to manufacturing, making them liable for Central Excise duty under a specific proviso. On the other hand, the department argued that the activity did not constitute manufacturing and, therefore, customs duty should be levied based on a different exemption notification. A show cause notice was issued to demand short paid duty, along with interest and penalties. The Addl. Commissioner confirmed the duty demand and imposed a penalty, which was set aside by the Commissioner (Appeals) who adopted a broader interpretation of 'manufacture' based on the EXIM Policy for 100% EOUs. The department appealed this decision, leading to the current proceedings.The department contended that the process undertaken by the respondents did not amount to manufacturing under the Central Excise Act, and hence, Central Excise duty was not applicable. They argued for the imposition of customs duty based on a specific exemption notification for 100% EOUs. On the other side, the respondents defended the Commissioner (Appeals) decision, emphasizing the broader interpretation of 'manufacture' for 100% EOUs as per the EXIM Policy and a relevant Board's Circular. They cited precedents to support their position that the concessional rate of duty should apply to their DTA clearances.Upon careful consideration of the arguments, the Tribunal observed that the definition of 'manufacture' for duty-free acquisition of goods by 100% EOUs under a specific notification did not align with the definition for charging Central Excise duty on DTA clearances. The Tribunal highlighted the need to determine if the process undertaken by the respondents constituted 'manufacture' under the Central Excise Act, involving the emergence of a new product with distinct characteristics specified in the Central Excise Tariff. As this crucial aspect was not adequately addressed in the previous orders, the matter was remanded to the original adjudicating authority for a fresh decision based on the outlined criteria.In conclusion, the Tribunal set aside the impugned order and remanded the case for a de novo decision, emphasizing the necessity to determine whether the process undertaken by the respondents amounted to 'manufacture' under the Central Excise Act for the appropriate levy of duty. The appeal was allowed by way of remand, with the cross objection filed by the Respondent also disposed of in the process.