Tribunal rules CNG kit assembly not manufacturing; excise duty overturned

The Tribunal ruled in favor of the appellant, determining that their activity of assembling CNG kits did not constitute manufacturing subject to central excise duty. The appellant's payment of sales tax on kit sales and service tax on installations was considered sufficient, with the Tribunal distinguishing the assembly process from manufacturing based on precedent. Consequently, the order demanding central excise duty and penalties was overturned, and the appeal, along with the stay application, was granted.

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Issues:
Central excise duty on manufacturing of CNG kits, applicability of service tax, imposition of penalties.

Analysis:
The case involved the appellant engaged in assembling and manufacturing CNG kits, importing various components and procuring domestic items for the kits. The department alleged that this activity amounted to manufacturing attracting central excise duty. The appellant argued that they paid service tax for installation charges and VAT or CST on the kits, citing precedents where similar activities were not considered manufacturing. The department defended the order, claiming the act of collecting and packing items for CNG conversion constituted manufacturing.

The Tribunal found that the appellant did not manufacture any items but assembled components into CNG kits, paying sales tax on kit sales and service tax on installations. Citing judgments on similar cases, the Tribunal held that merely collecting and packing components did not amount to manufacturing. It distinguished a previous case where the issue was not specifically addressed. Therefore, the impugned order demanding central excise duty and imposing penalties was set aside, and the appeal along with the stay application was allowed.

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