2014 (9) TMI 770 - AT - Central Excise

CESTAT Mumbai Upholds Duty Demand on Manufacturing Co, Examines 'Manufacture' Definition

The Appellate Tribunal CESTAT Mumbai upheld the Order-in-Original confirming a duty demand of Rs. 3,33,01,675 along with penalties and confiscation of ... Waiver of pre deposit - Manufacturing activity or not - assessee took different stand for different units - Material Handling Equipment and its parts - assessee pleaded that the goods which the appellant procured were already marketable and the appellant did not undertake any activity to make them marketable except for inspecting the goods and putting in the plastic bags along with tags. - Confiscation of goods - Imposition of redemption fine - Held that:- In respect of the activity undertaken in the factory at Thane on the same goods, the appellant is treating the activity as 'manufacture' and discharging excise duty liability thereon. Therefore, there is no reason why in respect of the same activity on the same product undertaken at their Bhiwandi godown, a different stand should be taken holding that the activity does not amount to 'manufacture'. The appellant cannot choose to discharge excise duty liability in some cases and not discharge duty liability in some other cases. Therefore, the claim of the appellant that the activity undertaken by them does not amount to 'manufacture' does not appear to convincing at this stage. During the course of argument, a question was also put to the appellant as to why they are procuring these parts and distributing it to their customers. In reply thereof, it was stated that these parts are difficult to obtain and once these are procured by the appellant and delivered to the customer, the customers believe the parts to be genuine and the same are supplied with the warranty cards. If that be so, the activity undertaken by the appellant improves the marketability of the product. Thus any activity, which improves the marketability of the product by undertaking labeling and packing etc. would definitely amount to 'manufacture'. Prima facie case not in favour of assessee - stay granted partly. Issues involved:- Confirmation of duty demand along with penalty and confiscation of goods- Whether the activity of labeling and packing parts amounts to 'manufacture' under Central Excise Act, 1944- Application of excise duty liability on parts procured and traded by the appellant- Invocation of extended period of limitation for duty demand- Prima facie case for waiver of pre-deposit of duesConfirmation of duty demand along with penalty and confiscation of goods:The case involved an appeal against an Order-in-Original confirming a duty demand of Rs. 3,33,01,675 along with penalties and confiscation of goods imposed on the appellant, a manufacturing company. The appellant contested the order before the Appellate Tribunal CESTAT Mumbai, challenging the duty demand and penalties levied by the adjudicating authority. The impugned order also imposed penalties on the General Manager of the appellant firm and the firm itself under Rule 26 of the Central Excise Rules, 2002. The Tribunal was presented with the appellant's grievances against the order.Activity of labeling and packing parts as 'manufacture':The central issue revolved around whether the activity of labeling, packing, and repacking parts undertaken by the appellant in their Bhiwandi godown amounted to 'manufacture' under the Central Excise Act, 1944. The appellant argued that the activity did not constitute 'manufacture' as defined under the Act, citing precedents and contending that the goods procured were already marketable, and the labeling process did not significantly alter the products. The Revenue, on the other hand, asserted that the activity enhanced the marketability of the parts to consumers, thus falling under the definition of 'manufacture.' The Tribunal analyzed the contentions of both parties to determine the nature of the activity and its classification under the Act.Application of excise duty liability on parts procured and traded:The appellant's contention included challenging the demand for excise duty on the parts procured and traded from their Bhiwandi godown. The Department argued that since the appellant had discharged excise duty liability for similar activities conducted in their Thane factory, the same should apply to the Bhiwandi godown operations. The Tribunal examined the consistency of the appellant's treatment of excise duty liabilities across different locations and products to ascertain the applicability of duty demands on the traded parts.Invocation of extended period of limitation for duty demand:Another aspect addressed was the invocation of the extended period of limitation for the duty demand raised by the Department. The appellant raised objections based on retrospective amendments in the law and the timing of duty demands, seeking exclusion of certain periods for duty liability calculation. The Tribunal acknowledged the complexity of the issue and deferred a detailed examination to a later stage, emphasizing the need for a comprehensive review during the final hearing.Prima facie case for waiver of pre-deposit of dues:Regarding the appellant's plea for a waiver of pre-deposit of dues, the Tribunal evaluated the arguments presented by both sides. After considering the nature of the product, revenue interests, and the lack of evidence regarding financial hardship, the Tribunal directed the appellant to make a pre-deposit of 25% of the confirmed duty demand within a specified period. The Tribunal outlined the conditions for compliance and the subsequent waiver of the remaining dues, with recovery stayed during the appeal's pendency.This comprehensive analysis of the judgment highlights the key issues addressed by the Appellate Tribunal CESTAT Mumbai, providing a detailed examination of the legal arguments and considerations involved in the case.