2016 (9) TMI 580 - AT - Central Excise

Manufacturing Gas Conversion Kits without Duty Payment Subject to Excise Duty

The Tribunal allowed the Revenue's appeal, holding that Gas Conversion Kits manufactured and cleared without payment of duty constituted manufacturing ... Manufacture - excisable goods - definition of manufacture under Section 2(f) of the Central Excise Act - identity of component parts versus composite goodsManufacture - excisable goods - definition of manufacture under Section 2(f) of the Central Excise Act - identity of component parts versus composite goods - Gas Conversion Kits manufactured and cleared by the respondent amount to manufacture and are excisable goods chargeable to duty. - HELD THAT: - The adjudicating authority had held that the items cleared were individual parts and that the Gas Conversion Kits did not amount to excisable manufacture because the items retained their identity. The Tribunal on review of records found that the respondent developed the design, undertook manufacture and marketed the product as a branded Gas Conversion Kit (Lovoto), and the consideration was received for the complete kit rather than for separate parts. Although the components retain individual identity, the assembly, design and sale of the complete branded kit constituted manufacture within the meaning of Section 2(f) of the Central Excise Act. For these reasons the Tribunal set aside the portion of the Commissioner's order holding the kits not excisable and held that they are chargeable to excise duty.Portion of the Commissioner's order holding the Gas Conversion Kits not excisable is set aside; the kits amount to manufacture and are chargeable to excise duty.Final Conclusion: Revenue appeal allowed; finding that Gas Conversion Kits are not excisable goods is set aside and the kits are held to be manufactured goods chargeable to duty under the Central Excise Act. Issues:Manufacture and clearance of Gas Conversion Kits without payment of duty and without following Central Excise procedures.Analysis:The appeal was filed against the Order-in-Original passed by the Commissioner of Central Excise, involving the manufacture and clearance of Gas Conversion Kits without payment of duty and non-compliance with Central Excise procedures. The Commissioner confirmed duty under Section 11A(2) of the Central Excise Act, 1944, and confiscated goods with an option for redemption. Penalties were also imposed on the individuals involved. The appeal was specifically against the part of the order where it was held that Gas Conversion Kits manufactured and cleared by a specific individual were not excisable goods and not chargeable to excise duty.The respondent did not appear or provide any intimation in multiple scheduled hearings, leading to the Revenue being directed to serve notice. The respondent was found absent at all provided addresses, prompting the appeal to proceed for disposal.During the proceedings, it was noted that the respondent had also filed an appeal against the impugned order, but due to non-compliance with pre-deposit orders, their appeals were dismissed. The adjudicating authority had initially held that Gas Conversion Kits were not excisable goods, but upon review of records, it was found that the kits were developed, manufactured, and sold based on imported Gas Conversion Kits. The Gas Conversion Kits were cleared under a specific brand name and were identified and sold as complete kits, not as individual parts. The Tribunal concluded that the Gas Conversion Kits constituted manufacturing activity and fell under the definition of excisable goods under Section 2(f) of the Central Excise Act. Consequently, the portion of the Commissioner's order holding otherwise was set aside, and the Revenue's appeal was allowed.In conclusion, the Tribunal found in favor of the Revenue, determining that the Gas Conversion Kits manufactured and cleared by the respondent amounted to manufacturing activity and were chargeable to excise duty, contrary to the initial ruling by the Commissioner.