2017 (2) TMI 672 - AT - Central Excise

Appellant's Processes Not Manufacture; Relief Granted from Central Excise Duty

The Tribunal held that the appellant's processes, including cutting, drilling, punching, bending, and welding, did not amount to manufacture, as they did ... Manufacture - excisability of fabricated parts - marketability - preparation for use in structures - binding nature of Supreme Court precedents (Article 141)Manufacture - excisability of fabricated parts - preparation for use in structures - marketability - Whether cutting to size, drilling, punching, bending and welding of duty paid MS angles, channels and plates to fabricate parts of transmission towers amounts to manufacture and attracts central excise duty - HELD THAT: - The Tribunal examined competing precedents including the Larger Bench decision in Mahindra & Mahindra Ltd. and earlier Tribunal and Supreme Court rulings such as Aruna Industries and decisions affirming it. The Judicial Member concluded that processes of cutting, drilling, punching and welding undertaken by the appellant do not produce a new excisable commodity as there is no emergence of a new article with a distinctive commercial identity, relying on the principle that manufacture requires transformation into a new and different article. The Technical Member, on the other hand, applied the Mahindra larger bench approach and the HSN based tariff heading 73.08 reasoning to treat the fabricated parts as excisable and marketable. The reference to a third member resolved the difference by applying the binding effect of the Supreme Court's decision in the appellant's own case (as explained by the third Member), and by holding that where the Supreme Court has decided on identical facts that the processes do not amount to manufacture, that decision governs. The Tribunal therefore followed the Supreme Court precedent cited in the appellant's own case and concluded that the fabrication processes in issue do not constitute manufacture attracting excise duty; where HSN classification or marketability was discussed, the majority treated the controlling authority as the Supreme Court decision on identical facts rather than the Larger Bench deviation. [Paras 6, 7, 8, 12, 20]The processes of cutting to size, drilling, punching, bending and welding of duty paid MS angles, channels and plates to fabricate parts of transmission towers do not amount to manufacture; the appellants are not liable to central excise duty for the periods in dispute.Final Conclusion: By a majority decision following the Supreme Court precedent in the appellant's own case, the Tribunal held that the fabrication processes do not amount to manufacture and the appellants are not liable to Central Excise duty for the disputed periods; appeals allowed with consequential relief. Issues Involved:1. Whether the processes undertaken by the appellant amount to manufacture.2. Classification of the final product under the Central Excise Tariff.3. Applicability of excise duty on the final product.4. Limitation and validity of the show cause notices.5. Marketability of the final product.6. Binding nature of previous judgments and their applicability.Issue-wise Detailed Analysis:1. Whether the processes undertaken by the appellant amount to manufacture:The appellant argued that the processes they undertook (cutting, drilling, punching, bending, welding) on duty-paid MS Channels, MS Plates, and MS Angles did not amount to manufacture. The appellant cited various decisions, including Karnataka Electricity Board Vs. CCE Bangalore and Tansi Engineering Works Vs. CCE, which held that such processes do not result in the creation of a new commodity known to the market. The original adjudicating authority agreed, stating that the processes did not bring any change in the raw materials that could be treated as new, distinct commodities. However, the Commissioner (Appeals) reversed this decision, asserting that the processes resulted in the emergence of new identifiable products, thus amounting to manufacture.2. Classification of the final product under the Central Excise Tariff:The Revenue classified the final products under chapter heading 7308.90 of the Central Excise Tariff, which covers structures and parts of structures of iron or steel. The Commissioner (Appeals) upheld this classification, stating that the raw materials were converted into parts of transmission towers, which are covered under Chapter 73 and are excisable.3. Applicability of excise duty on the final product:The Additional Commissioner initially vacated the show cause notices, holding that the processes did not amount to manufacture, and thus, the final products were not excisable. However, the Commissioner (Appeals) reversed this decision, holding that the final products were excisable as they were new identifiable products resulting from the manufacturing processes.4. Limitation and validity of the show cause notices:The appellant contested the demand on the ground of limitation, arguing that the show cause notices were issued beyond the permissible period. However, this issue was not the primary focus of the final judgment and was overshadowed by the substantive issue of whether the processes amounted to manufacture.5. Marketability of the final product:The Commissioner (Appeals) held that the parts of transmission towers were marketable and thus excisable. The Tribunal, in previous cases like Elecon Engineering Co. Ltd. Vs. CCE, Chandigarh, had held that fabricated items like columns and purlines, which were assembled at the work site, did not amount to manufacture and were not excisable. The Supreme Court upheld this view, stating that the process did not result in a new product known to the market.6. Binding nature of previous judgments and their applicability:The Tribunal had to consider various precedents, including the larger Bench decision in Mahindra & Mahindra Ltd. vs. CCE, which held that similar processes amounted to manufacture. However, the Tribunal also had to consider the Supreme Court's affirmation of decisions like Aruna Industries and Wainganga Sahkari S. Karkhana Ltd., which held that such processes did not amount to manufacture. The Tribunal ultimately followed the Supreme Court's decisions, which were binding and provided that the processes did not amount to manufacture.Separate Judgments Delivered by the Judges:- Member (Judicial): Held that the processes undertaken by the appellant did not amount to manufacture, based on the Supreme Court's affirmation of similar cases. Thus, the final products were not excisable.- Member (Technical): Disagreed, holding that the processes resulted in new identifiable products, which were excisable under Chapter 73.08 of the Central Excise Tariff.Final Decision by Third Member:The third member, B. Ravichandran, resolved the difference of opinion by siding with the Member (Judicial). The processes undertaken by the appellant did not amount to manufacture, and thus, the final products were not liable for Central Excise duty. The decision was based on the binding nature of the Supreme Court's rulings in similar cases.Conclusion:The Tribunal, by majority, held that the appellant's processes did not amount to manufacture, and the final products were not excisable. The appeal was allowed, providing consequential relief to the appellant.