2025 (3) TMI 567 - AT - Central Excise

Drawing and re-drawing copper products does not constitute manufacture under Central Excise Act, classification under heading 7409 incorrect

Radiant Industries Versus Commissioner of Central Excise, Thane-II And Khubilal Jain Versus Commissioner of Central Excise, Thane-II

Radiant Industries Versus Commissioner of Central Excise, Thane-II And Khubilal Jain Versus Commissioner of Central Excise, Thane-II - TMI 1. ISSUES PRESENTED and CONSIDEREDThe core issues considered in this judgment were:Whether the process of drawing and re-drawing copper flats into copper patta/patti constitutes 'manufacture' under the Central Excise Act, 1944, necessitating the payment of excise duty.The correct classification of the resultant product under the Central Excise Tariff Act, 1985, specifically whether it falls under Chapter 74 and the implications of Note 1(g) to Chapter 74.Whether the procedural requirements, including the right to cross-examine witnesses whose statements were relied upon, were adhered to during the adjudication process.Evaluation of the evidence supporting allegations of clandestine removal of goods without payment of excise duty.2. ISSUE-WISE DETAILED ANALYSISManufacture and Classification:Relevant legal framework and precedents: The relevant legal provisions include Section 2(f) of the Central Excise Act, 1944, which defines 'manufacture,' and the classification rules under the Central Excise Tariff Act, 1985. The judgment also references the Supreme Court decision in Laminated Packings (P) Ltd., which established that if a process results in a commercially distinct product, it constitutes manufacture.Court's interpretation and reasoning: The Tribunal analyzed whether the transformation of copper flats into patta/patti resulted in a new product. It was determined that both products fell under the same tariff heading (7409), and the process of drawing or re-drawing was not specified as manufacturing for this heading.Key evidence and findings: The Commissioner relied on the physical transformation and marketability of the products to assert manufacture. However, the Tribunal found that the Commissioner misapplied the legal framework, as the transformation did not meet the statutory definition of manufacture.Application of law to facts: The Tribunal concluded that the process did not result in a new commercially distinct product as both the input and output were classified under the same tariff heading.Treatment of competing arguments: The appellants argued that the process did not constitute manufacture, supported by the absence of a new tariff classification. The Tribunal agreed, emphasizing the importance of statutory definitions and classification notes over physical transformation alone.Conclusions: The Tribunal concluded that the process did not amount to manufacture under the Central Excise Act, and the classification under the same heading negated the need for excise duty.Procedural Compliance and Evidence:Relevant legal framework and precedents: Section 9D of the Central Excise Act, 1944, outlines the procedure for relying on statements as evidence, including the right to cross-examine witnesses.Court's interpretation and reasoning: The Tribunal found that the Commissioner failed to allow cross-examination of witnesses, which is a critical procedural requirement. The Tribunal referenced prior judgments emphasizing the necessity of adhering to procedural safeguards.Key evidence and findings: The Tribunal noted the reliance on statements from company employees and panchanama proceedings without allowing cross-examination, undermining the evidentiary basis for the conclusions drawn.Application of law to facts: The Tribunal determined that the failure to permit cross-examination rendered the evidence inadmissible, thereby weakening the case for clandestine removal.Treatment of competing arguments: The appellants contended that procedural lapses invalidated the evidence, a position upheld by the Tribunal based on statutory requirements and judicial precedents.Conclusions: The Tribunal concluded that the procedural deficiencies, particularly the denial of cross-examination, invalidated the evidentiary basis for the allegations of clandestine removal.3. SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning: 'If by application of labour and skill an object is transformed to the extent that is commercially known differently, it will suffice to say that manufacture has taken place for the purpose of Central Excise... However, the process of 'drawing or re-drawing' is not mentioned as a process amounting to manufacture for the product of chapter heading 7409.'Core principles established: The judgment reinforced the principle that classification and statutory definitions take precedence over physical transformation in determining manufacture. It also underscored the necessity of procedural compliance, particularly the right to cross-examine, in upholding evidentiary standards.Final determinations on each issue: The Tribunal set aside the impugned order, concluding that the process did not constitute manufacture and that procedural lapses invalidated the evidence of clandestine removal. The appeals were allowed in favor of the appellants.