1987 (1) TMI 252 - AT - Central Excise

Manufacturing company must pay duty on new goods created from customer materials.

The Tribunal upheld the decision of the Assistant Collector of Central Excise and the Appellate Collector, ruling against the manufacturing company ... Valuation of goods produced on job work basis Issues:1. Assessment of duty on job work charges.2. Interpretation of what constitutes manufacture for the purpose of duty assessment.Analysis:1. The case involved the appellants, a manufacturing company, claiming that duty should be payable only on the amount charged for job work and not on the full value of the goods, including raw materials. The Assistant Collector of Central Excise and the Appellate Collector both ruled against the appellants, directing them to pay duty on the total value of goods. The Tribunal was called upon to review this decision.2. The Tribunal rejected the appellants' request for an adjournment and proceeded with the case. The department argued that duty should be paid on the full value of the new goods manufactured by the appellants from primary materials received from customers. The Tribunal agreed with this argument.3. The appellants contended that the changes made to the materials did not constitute manufacture as per judicial interpretations, citing a letter from the Central Board of Excise and Customs. They argued that the changes only involved shaping, perforating, channeling, ribbing, and did not result in the emergence of new goods. However, the Tribunal disagreed, stating that these changes were necessary to create new products like tanks and dust catchers.4. The Tribunal emphasized that whenever a new article emerges from the work done on a material, it constitutes manufacture. They highlighted that even if the purchased articles were not worked, they became fittings, fixtures, or attachments for the new products, forming a new commodity.5. The Tribunal referred to a Supreme Court judgment stating that not every change is manufacture, but in this case, the changes made by the appellants resulted in the creation of new products like tanks and bleachers. They explained that even minimal work on a material can transform it into a new product when combined with other materials.6. The Tribunal illustrated with an example where the appellants received stainless steel sheets to fabricate a wet dust catcher. They emphasized that even though the appellants did job work, it led to the creation of new articles, warranting duty assessment on the full value of the goods. The appeal was deemed meritless and rejected by the Tribunal.