2024 (3) TMI 916 - HC - Central Excise

Department fails to prove stator renewal processes constitute manufacture under excise law

The Telangana HC dismissed the Department's appeals challenging a Tribunal's finding regarding whether processes undertaken on stators constituted ... Process amounting to manufacture - process undertaken on stators received from job workers i.e. the process of shaping, varnishing and baking - HELD THAT:- Perusal of the pleadings and the records would reveal that the order of assessment and the other materials available with the appellant do not indicate that the nature of the process undertaken at the assessee’s Service Centre in respect of the so-called retrieving old stators from old compressors received by the assessee and mere using of old stators and subjecting the old stators to some process and renewing the same would not be sufficient. Moreover, all these allegations and contentions raised by the learned Senior Standing Counsel for CBIC would amount to be factual in nature. Therefore, in the course of exercising the powers under Section 35G of the Act, this Court cannot interfere with the finding of facts unless there is any strong substantial question of law or perversity made out. On this very ground, there are no merits in the appeals preferred by the appellant. In the teeth of the aforesaid finding by the Tribunal and that no sufficient material available with the Department to negate the said finding given by the Tribunal, it is difficult to interfere with the said finding of the Tribunal. All these appeals filed by the Department therefore being devoid of merits, deserves to and are accordingly rejected. Appeal dismissed. Issues Involved:- Challenge to the order passed by the Customs Excise and Gold (Control) Appellate Tribunal- Determination of whether stators used by the appellant constitute manufactured goods under the Central Excise Act- Appeal regarding the process of shaping, varnishing, and baking of stators- Consideration of activities carried out with stators beyond shaping, varnishing, and baking- Appeal based on the outsourcing of shaping, varnishing, and baking process to job workers- Assessment of the process undertaken on old stators from scrap compressorsThe judgment addresses eleven appeals challenging the order passed by the Customs Excise and Gold (Control) Appellate Tribunal regarding the classification of stators used by the appellant as manufactured goods under the Central Excise Act. The appellant, a manufacturer of compressors and condensing units, was alleged to have not discharged duty on stators used captively in compressor repair. Show cause notices were issued, leading to an Order-in-Original (OIO) confirming duty demands for the period from 01.01.1987 to 01.01.1998. The Tribunal initially reversed the OIO, but the Supreme Court affirmed that the process of shaping, varnishing, and baking of stators constituted manufacturing activity.The key issue revolved around whether the process of shaping, varnishing, and baking of stators at the appellant's Service Centre qualified as manufacturing under the Act. The Supreme Court's judgment established that these processes were essential for the stators to be used in compressors, thus constituting manufacturing activity. The appellant argued that after May 1992, the shaping, varnishing, and baking processes were outsourced to job workers, exempting them from Central Excise levy. The Tribunal's finding, supported by a report, indicated that the activities were indeed transferred to job workers post-1992, justifying the exemption.Furthermore, the Department contended that incidental activities carried out on stators beyond shaping, varnishing, and baking should also be considered in determining their classification as manufactured goods. However, the OIO and subsequent records primarily focused on the shaping, varnishing, and baking processes, lacking evidence of other manufacturing activities. The Department's argument regarding the renewal of old stators from scrap compressors was deemed factual and insufficient to warrant interference under Section 35G of the Act.In conclusion, the appeals by the Department were rejected as they lacked merit and substantial legal grounds for interference. Additionally, the monetary limit set by the CBIT for appeals was not met in each case, further justifying the rejection of the appeals. No costs were awarded, and pending miscellaneous applications were closed.