Manufacture by assembly of imported and indigenous parts attracts excise duty, with confiscation and penalty following statutory breach.

Assembly of imported and indigenous components into motor cars was treated as manufacture because a distinct excisable product emerged, so Central Excise duty was payable despite prior customs duty on the imported parts. The limitation objection failed because the notices were issued within six months of seizure, and a prior clarification request did not suspend statutory compliance or defeat the demand. Confiscation was upheld for manufacture without the required licence, while redemption fine and penalty were reduced and the duty was remanded for fresh quantification after considering admissible proforma or Modvat credit.

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Issues: (i) Whether assembly of imported and indigenous components into motor cars amounted to manufacture so as to attract Central Excise duty notwithstanding payment of customs duty on the imported parts; (ii) whether the duty demand was barred by limitation; (iii) whether confiscation of the cars and the consequential redemption fine and penalty were sustainable.

Issue (i): Whether assembly of imported and indigenous components into motor cars amounted to manufacture so as to attract Central Excise duty notwithstanding payment of customs duty on the imported parts.

Analysis: Customs duty is levied on the event of import, whereas excise duty is attracted by the event of manufacture. Assembly of components into a finished motor car brings into existence a distinct excisable product. The fact that customs duty, including countervailing duty, had been paid on imported parts does not preclude levy of excise duty on the separate manufacturing activity. Different aspects of the same transaction may be taxed separately when the law so provides.

Conclusion: The activity amounted to manufacture and Central Excise duty was payable. The objection based on double taxation failed.

Issue (ii): Whether the duty demand was barred by limitation.

Analysis: The notices were issued within six months of seizure in both sets of proceedings. The goods had been provisionally released, but the notices were nevertheless within the period contemplated by the applicable seizure-related limitation. A prior letter seeking clarification did not exempt the appellant from statutory obligations or negate the consequences of non-compliance. Mere enquiry to the department did not bar the demand on limitation.

Conclusion: The plea of limitation was rejected and the duty demand was upheld, subject to re-quantification after considering admissible credit.

Issue (iii): Whether confiscation of the cars and the consequential redemption fine and penalty were sustainable.

Analysis: The majority held that manufacture was undertaken without obtaining the required licence and that the goods were therefore liable to confiscation under the applicable rule. The statutory language made confiscation and penalty consequential upon the contravention. The dissenting view held that bona fide belief and absence of intent to evade duty made confiscation and penalty unsustainable, but that view did not prevail.

Conclusion: Confiscation was upheld, while the redemption fine and penalty were reduced by the majority and the matter was remanded for re-quantification of duty with consideration of admissible proforma or Modvat credit.

Final Conclusion: The appeal succeeded only to a limited extent: the duty demand on manufacture was sustained, limitation was rejected, confiscation was upheld, the fine and penalty were reduced, and the duty was remanded for fresh quantification after examining credit entitlement.

Ratio Decidendi: Import and manufacture constitute separate taxable events, and assembly of components into a new excisable product attracts excise duty even if customs duty has already been paid on the imported inputs; once the statutory contravention is established, confiscation and consequential penalty follow under the applicable rule.

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