2011 (11) TMI 556 - AT - Central Excise

Tribunal grants waiver on duty, interest, and penalty, ruling in favor of manufacturing activities.

HINO MOTORS SALES INDIA PVT. LTD. Versus COMMISSIONER OF C. EX., THANE-I

HINO MOTORS SALES INDIA PVT. LTD. Versus COMMISSIONER OF C. EX., THANE-I - 2013 (295) E.L.T. 561 (Tri. - Mumbai) Issues:Waiver of pre-deposit of duty, interest, and penalty based on the definition of 'manufacture' under the Central Excise Act.Analysis:The applicants sought waiver of pre-deposit of duty, interest, and penalty amounting to Rs. 4,80,79,916/-, as the demand was confirmed due to denial of credit on the grounds that their activities did not constitute manufacture. The adjudicating authority concluded that activities complying with other laws would not amount to manufacture unless they independently satisfy the criteria set by the Courts in interpreting the definition of 'manufacture' under the Central Excise Act.The applicants imported chassis, paid countervailing duty, and undertook various processes such as fitting mirrors, lights, and kits as per CMVR requirements. They also performed additional processes on the motor vehicles received from job workers. The applicants argued that their activities fell under the definition of 'manufacture' as per Section 2(f) of the Central Excise Act, citing relevant legal precedents.The Revenue contended that the activities undertaken by the applicants did not amount to manufacturing motor vehicles, as they lacked plant or machinery and merely imported chassis without conducting essential processes. However, the Tribunal found that the applicants' processes on the chassis were crucial for compliance with Motor Vehicle Rules, and the job workers further manufactured bodies on the duty-paid chassis.Referring to the definition of 'manufacture' under Section 2(f) of the Central Excise Act, the Tribunal highlighted the Supreme Court's interpretation emphasizing that every change in a commodity due to treatment, labor, or manipulation does not constitute manufacture. It stated that a process is considered in relation to manufacture if it is integral to the production of goods. The Tribunal also cited a Kerala High Court decision where a process was deemed incidental to manufacture for giving a finishing touch.Based on the legal interpretations and the facts presented, the Tribunal found that the applicants had a strong case for waiver of dues. It noted that the Revenue's argument to deny credit on the grounds of insufficient manufacturing activities was not persuasive, as the applicants had paid duty during clearance. Consequently, the Tribunal granted the waiver of pre-deposit of duty, interest, and penalty, and stayed the recovery during the appeal's pendency.In conclusion, the Tribunal allowed the stay petition, ruling in favor of the applicants and emphasizing the importance of the definition of 'manufacture' in determining the applicability of duties and penalties under the Central Excise Act.