2019 (6) TMI 738 - AT - Central Excise

Tribunal rules fabrication not manufacturing for excise duty

Commissioner of Central Excise, Thane I Versus Spectron Engineers Pvt. Ltd.

The Tribunal dismissed the Revenue's appeal, ruling that the fabrication of structures from mild steel plates did not amount to manufacturing for central ... Manufacture - fabrication of structures, such as silos, pressure vessels, bridges etc., out of the principal raw material i.e. ‘mild steel plates’ occurring on site - HELD THAT:- The respondent had been discharging service tax liability on ‘job work’ and had been paying VAT on the material component is not in doubt. The original authority has placed reliance on the decision of the Tribunal in OSNAR CHEMICAL PVT. LTD. VERSUS COMMISSIONER OF C. EX., BANGALORE-II [2008 (9) TMI 344 - CESTAT, BANGALORE] to hold that discharge of tax liability under one law precludes the invoking of another law merely for garnering revenue that has thereby escaped one of the jurisdictions. By discharging the tax liability on the job work charges as well as by discharge of VAT liability on ‘brought out’ items used for fabrication at site, the scope for considering the activity as manufacture is eclipsed entirely. In this context of mutually exclusive levies under the scheme of taxation in the Constitution, the activity of the respondent is works contract and hence not leviable to duty under Central Excise Act, 1944. Appeal dismissed - decided against Revenue. Issues Involved:1. Whether fabrication of structures from mild steel plates amounts to manufacture for the purpose of central excise dutyRs.2. Whether the value of raw materials supplied free of cost should be included in the computation of dutiable threshold under central excise lawRs.3. Whether goods in semi-finished condition, not attaining final form, are liable to central excise dutyRs.4. Whether the activity of the respondent constitutes a works contract and is not leviable to duty under the Central Excise Act, 1944Rs.Analysis:Issue 1:The central issue in this case revolves around whether the fabrication of structures such as silos, pressure vessels, and bridges from mild steel plates constitutes manufacturing for the purpose of central excise duty. The Revenue contended that the adjudicating authority erred in accepting the respondent's claim that such fabrication does not amount to manufacture. The Revenue argued that the cost of raw materials supplied free of cost should be added for determining the value of goods, citing relevant case law and provisions under the Central Excise Valuation Rules. The respondent, on the other hand, maintained that the goods in semi-finished condition, not attaining final form at their premises, are not saleable as such, and therefore, should not be subjected to central excise duty.Issue 2:Another crucial aspect of this case pertains to the inclusion of the value of raw materials supplied free of cost in the computation of the dutiable threshold under central excise law. The Revenue argued that excluding the cost of such raw materials would render the relevant provisions redundant and superfluous. They highlighted the discrepancy in the Form H submissions by the respondent concerning the quantum of exports claimed for deduction from the value of clearances. The respondent, however, contended that the original authority assessed the facts correctly, and there is no basis for reversing the decision on non-excisability.Issue 3:The discussion also delved into whether goods in a semi-finished condition, yet to attain their final and marketable form, are liable to central excise duty. The respondent's counsel argued that the retention of the original character and identity of the processed commodity is crucial, and goods not reaching their final form are not saleable as such. They emphasized the lack of evidence showing the possession of machinery by the respondent for completing the manufacturing process.Issue 4:Lastly, the Tribunal examined whether the activity of the respondent constituted a works contract and therefore was not leviable to duty under the Central Excise Act, 1944. The Tribunal relied on the precedent and reasoned that the discharge of tax liability under one law precludes invoking another law merely for revenue purposes. By discharging service tax liability on job work charges and VAT liability on items used for fabrication, the activity was deemed a works contract and not subject to central excise duty.In conclusion, the Tribunal dismissed the Revenue's appeal, finding it without merit based on the analysis and reasoning presented in the judgment.