Reconditioning of finished goods is not manufacture; service tax applies, and time-barred demands fail where disclosure was made.

Reconditioning of finished threaded die rolls returned after wear and tear did not create a new and distinct product, so the activity was not manufacture and the consideration remained liable to service tax as maintenance and repair service. Section Note 6 of Section XVI was inapplicable because it covers incomplete or unfinished goods, not finished goods sent back for reprocessing. Demands raised beyond the prescribed limitation period were unsustainable where the department had prior notice of the activity through correspondence and declarations, and the corresponding interest and penalties also fell with the time-barred demand.

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Issues: (i) Whether reconditioning of worn-out threaded die rolls amounted to manufacture so as to take the activity outside service tax under maintenance and repair services and within Section Note 6 of Section XVI of the Central Excise Tariff Act, 1985; (ii) Whether the demands raised in two appeals were barred by limitation to the extent they travelled beyond the prescribed period, with consequential effect on interest and penalties.

Issue (i): Whether reconditioning of worn-out threaded die rolls amounted to manufacture so as to take the activity outside service tax under maintenance and repair services and within Section Note 6 of Section XVI of the Central Excise Tariff Act, 1985.

Analysis: The activity was undertaken on finished threaded die rolls that had already been cleared and later received back after wear and tear. The process of removing old threads, stress relieving, threading and chamfering restored the goods to usable condition, but did not bring into existence a new and distinct product. Section Note 6 of Section XVI was inapplicable because it deals with incomplete or unfinished goods having the essential character of a complete or finished article, not finished goods returned for reprocessing.

Conclusion: The activity did not amount to manufacture, and the consideration received was liable to service tax under maintenance and repair services.

Issue (ii): Whether the demands raised in two appeals were barred by limitation to the extent they travelled beyond the prescribed period, with consequential effect on interest and penalties.

Analysis: In the two appeals, the assessees had informed the department about the nature of the reprocessing activity by correspondence and declaration, and the department did not act on those disclosures. The demands beyond the period of limitation from the date of show-cause notice were therefore unsustainable. Since the time-barred portion of the demand could not survive, the related interest and penalties also could not survive.

Conclusion: The demands beyond limitation in the two appeals were set aside along with the corresponding interest and penalties, while the demands within limitation were sustained.

Final Conclusion: The common order sustained tax liability on the merits, but granted partial relief by excluding the time-barred demands in the specified appeals and annulling the consequential interest and penalties on that portion.

Ratio Decidendi: Reprocessing of finished goods returned after wear and tear does not amount to manufacture unless it results in a new and distinct product, and demands beyond the prescribed limitation period are not sustainable where the department was put on notice of the activity.

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