2024 (6) TMI 1178 - AT - Central Excise

Aluminum dye-cast component manufacturing by job-worker from ingots does not constitute manufacture under excise law

CESTAT Chandigarh held that aluminum dye-cast component manufacturing from aluminum ingots by job-worker does not constitute manufacture under excise law. ... Process amounting to manufacture or not - appellants had been receiving inputs like aluminum ingots from M/s Auto Ignition Ltd., Rudrapur, Uttrakhand and job-work challans for making aluminum dye-cast components - area-based exemption contained under N/N. 32/99 availed - HELD THAT:- Tribunal has dealt with a case involving identical facts in the case of ALUMECO INDIA EXTRUSION LTD. VERSUS COMMR. OF C. EX., HYDERABAD-I [2009 (5) TMI 402 - CESTAT, BANGALORE] observed that 'It is his finding that the definition of “manufacture” includes everything, which undergoes a change. We find that the learned Adjudicating Authority has misdirected himself on this ground.' The process undertaken by the appellants on the ingots supplied by the principal job-worker does not amount to manufacture; the facility available to the principal manufacturer or the job-worker cannot be denied for procedural infractions, more so, when the Department was put to notice by way of seeking permission; it is not the fault of the principal manufacturer or the job-worker if there was delay in giving or denying the permission. It is opined that if the process undertaken by the job-worker/ appellant amounted to manufacture, duty requires to be demanded from the principal manufacturer and in no case, duty can be demanded from the job-worker. Appeal allowed. Issues Involved:1. Whether the processes undertaken by the appellants amount to manufacture.2. Applicability of Notification No.214/86 and Rule 16A of the Central Excise Rules, 2002.3. Liability for payment of Central Excise Duty.4. Marketability of the processed goods.Detailed Analysis:1. Whether the processes undertaken by the appellants amount to manufacture:The appellants argued that the processes they undertook on the aluminum ingots received from their principal manufacturers did not amount to manufacture. They relied on the case of Alumeco India Extrusion Ltd. and Moti Laminates Pvt. Ltd., where it was held that goods become dutiable only when they are marketable. The Tribunal agreed with this argument, noting that the processes performed by the appellants did not result in a new, marketable product. The Tribunal emphasized that the resultant goods were not cleared from the job-workers' premises to independent buyers and further processes like processing, testing, and repair were yet to be performed.2. Applicability of Notification No.214/86 and Rule 16A of the Central Excise Rules, 2002:The appellants received aluminum ingots under Notification No.214/86 by mistake, but they argued that this should not deny them the substantial benefit of Rule 16A of the Central Excise Rules, 2002. The Tribunal found this argument acceptable, stating that the substantial benefit taken under intimation to the Central Excise Authorities cannot be denied for the wrong mention of the Notification. The Tribunal also noted that the principal manufacturer had applied for permission under Rule 16A and had informed the Department about sending inputs for further processing.3. Liability for payment of Central Excise Duty:The Tribunal held that even if the principal manufacturer was at fault or not eligible to send inputs either under Rule 16A or Notification No.214/86, the appellants could not be held liable for payment of Excise Duty. The duty liability, if any, should be on the principal manufacturer, not the job-worker who returns the processed goods to the principal manufacturer. The Tribunal emphasized that the principal manufacturer is liable to pay duty and not the job-worker.4. Marketability of the processed goods:The Tribunal referenced the case of Alumeco India Extrusion Ltd., which dealt with the marketability of processed goods. It was established that for goods to be dutiable, they must be marketable in the condition they are removed from the factory. The Tribunal found that the processed aluminum ingots were not marketable as they required further processes. The burden of proving marketability lies with the revenue, and in this case, the revenue failed to provide evidence that the processed goods were marketable in their condition at the time of removal.Conclusion:The Tribunal concluded that the processes undertaken by the appellants did not amount to manufacture. The procedural infractions regarding the wrong mention of Notification No.214/86 should not deny the substantial benefit available under Rule 16A. The duty, if any, should be demanded from the principal manufacturer and not the job-worker. The appeals were allowed, and the orders demanding Central Excise Duty from the appellants were set aside.Order:Both appeals were allowed, and the order was pronounced in the open court on 25.06.2024.