2019 (6) TMI 876 - HC - Central Excise

Salvaging & Assembling Used Machine Parts = Manufacturing under Central Excise Act

The Court held that salvaging parts from a used Tunnel Boring Machine, remanufacturing them, and assembling them into a different machine constitutes ... Process amounting to manufacture or not - process of salvaging parts from a used TBM, remanufacturing scrapped parts and components for reassembling the same into a different and unique machine designed for a project specific function - Revenue submitted that the aforesaid proceedings have in fact been placed and pressed into service by the Appellant [i.e., writ petitioner herein] before the 2nd respondent, but the same has not been adverted to in the impugned order - HELD THAT:- It follows as a natural and indisputable sequitur that the 2nd respondent has passed the impugned order, dated 31.10.2017, without adverting to the aforesaid proceedings, wherein it has been held that the aforementioned activity of the writ petitioner is in fact a manufacturing activity within the meaning of Section 2(f) of CE Act. The Commissioner (Appeals-II) (2nd respondent) has to necessarily be directed to have a relook of the entire matter, holding that the aforementioned activity of the writ petitioner qualifies as a manufacturing activity within the meaning of 2(f) of CE Act and acceptance of the same by the committee of Chief Commissioners. A direction is given to the 2nd respondent to hear the appeal afresh in accordance with law, after giving opportunity of personal hearing to the writ petitioner - Petition allowed by way of remand. Issues:1. Whether salvaging parts from a used Tunnel Boring Machine (TBM), remanufacturing scrapped parts, and reassembling them into a different machine constitutes manufacturing activity under the Central Excise Act, 1944.2. Whether the Appellate Authority erred in ignoring a previous order and acceptance by the committee of Chief Commissioners regarding the manufacturing activity.3. Whether the writ petition is maintainable considering the availability of an alternate remedy before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT).Issue 1:The central theme of the case revolves around determining whether salvaging parts from a used TBM, remanufacturing scrapped parts, and reassembling them into a different machine qualifies as a manufacturing activity under Section 2(f) of the Central Excise Act, 1944. The Deputy Commissioner of Central Excise issued a Show Cause Notice (SCN) to the petitioner, contending that the activity does not amount to manufacturing. The original authority rejected the rebate claimed by the petitioner on the basis that it was not a manufacturing activity. However, in a subsequent order, the original authority held that the activity does amount to manufacture, resulting in additional duty to the exchequer. The Appellate Authority initially rejected the claim, but a committee of Chief Commissioners accepted that the activity is indeed manufacturing. The writ petition challenges the Appellate Authority's failure to consider this acceptance and seeks a fresh hearing.Issue 2:The Appellate Authority failed to address a previous order and acceptance by the committee of Chief Commissioners, which concluded that the activity of the petitioner constitutes manufacturing under the Central Excise Act, 1944. Despite the acceptance of this position, the Appellate Authority passed an order ignoring this crucial aspect. The High Court set aside the Appellate Authority's order and directed a fresh hearing, emphasizing the need for the Appellate Authority to consider the earlier order and acceptance by the committee of Chief Commissioners.Issue 3:The maintainability of the writ petition was challenged on the ground of the availability of an alternate remedy before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). However, the High Court, after considering the contentions raised by the petitioner regarding the manufacturing activity and the failure of the Appellate Authority to address crucial evidence, deemed the writ petition maintainable. The Court provided an interim stay and directed the Appellate Authority to conduct a fresh hearing, taking into account the earlier order and acceptance by the committee of Chief Commissioners, within a specified timeframe.In conclusion, the judgment delves into the intricate details of whether salvaging and remanufacturing parts from a used TBM amount to manufacturing under the Central Excise Act, 1944. It highlights the importance of considering previous orders and acceptances by higher authorities in decision-making processes, ensuring a fair and comprehensive evaluation of the case. The Court's meticulous analysis emphasizes the need for a thorough review of all relevant evidence and legal provisions in resolving disputes related to manufacturing activities under the Central Excise Act.