2025 (3) TMI 1243 - AT - Central Excise

Job work activities don't automatically constitute manufacture requiring excise duty payment under N/N. 214/86 CE

M/s. Hindustan Moulds and Dies Pvt Ltd, Unit II Versus Commissioner of GST and Central Excise, Coimbatore

M/s. Hindustan Moulds and Dies Pvt Ltd, Unit II Versus Commissioner of GST and Central Excise, Coimbatore - TMI ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include: Whether the job work activities performed by the appellant constitute 'manufacture' under the Central Excise Act, 1944, thus attracting excise duty. Whether the appellant is liable to pay excise duty despite the principal manufacturers not filing the necessary declarations as per Notification No. 214/86 CE. Whether the invocation of the extended period of limitation for duty demand is justified. The applicability of penalties under Rule 25 of the Central Excise Rules, 2002, read with Section 11AC of the Central Excise Act, 1944.ISSUE-WISE DETAILED ANALYSIS1. Job Work Activities and Manufacture Relevant Legal Framework and Precedents: The determination of whether an activity amounts to 'manufacture' is guided by the Central Excise Act, 1944. The Tribunal referenced precedents such as Tamil Nadu Generation & Distribution Corporation Ltd Vs C.C.E., Salem, and Namdhari Industrial Traders Vs Commr of Cex & ST Ludhiana, emphasizing that not all processes constitute manufacture. Court's Interpretation and Reasoning: The Tribunal noted that the appellant's activities involved machining, bending, cutting, and pressing, which resulted in semi-finished goods. These goods were further processed by the principal manufacturers before being marketed, indicating that the appellant's activities did not result in a new, marketable product. Key Evidence and Findings: The appellant's submissions highlighted that they only collected labor charges and did not add materials, reinforcing that their activities did not amount to manufacture. Application of Law to Facts: The Tribunal found that the onus was on the Revenue to prove that the appellant's activities amounted to manufacture, which was not sufficiently demonstrated. Treatment of Competing Arguments: The Tribunal acknowledged the appellant's reliance on case law that supported their position and criticized the lower authorities for not addressing these arguments adequately. Conclusions: The Tribunal concluded that the appellant's activities did not constitute manufacture under the Central Excise Act.2. Non-Filing of Declarations and Notification No. 214/86 CE Relevant Legal Framework and Precedents: Notification No. 214/86 CE provides exemptions for job work activities, contingent on the principal manufacturer filing necessary declarations. Court's Interpretation and Reasoning: The Tribunal referenced decisions such as Moon Chemicals Vs. Commissioner of Central Excise and Salem Weld Mesh Vs. Commissioner of Central Excise, which held that procedural lapses by the principal manufacturer should not negate substantive benefits to the job worker. Key Evidence and Findings: It was undisputed that the goods processed by the appellant were used by the principal manufacturers in further manufacturing. Application of Law to Facts: The Tribunal found that the denial of exemption based solely on procedural non-compliance by the principal manufacturers was unjust. Treatment of Competing Arguments: The Tribunal favored the appellant's position that procedural lapses should not deny substantive benefits, aligning with established case law. Conclusions: The Tribunal held that the appellant was entitled to the exemption under Notification No. 214/86 CE.3. Invocation of Extended Period of Limitation Relevant Legal Framework and Precedents: The extended period of limitation under the Central Excise Act requires evidence of wilful suppression or intent to evade duty. Court's Interpretation and Reasoning: The Tribunal noted the absence of evidence indicating wilful suppression or intent to evade duty by the appellant. Key Evidence and Findings: The appellant's belief that their activities did not constitute manufacture was supported by case law, indicating a lack of intent to evade duty. Application of Law to Facts: The Tribunal found the invocation of the extended period unjustified in the absence of wilful suppression. Treatment of Competing Arguments: The Tribunal criticized the lower authorities for failing to provide evidence of wilful suppression. Conclusions: The Tribunal concluded that the demand was barred by limitation.4. Imposition of Penalties Relevant Legal Framework and Precedents: Penalties under Rule 25 of the Central Excise Rules, 2002, and Section 11AC of the Central Excise Act require evidence of intent to evade duty. Court's Interpretation and Reasoning: The Tribunal found no basis for penalties given the lack of evidence for wilful suppression or intent to evade duty. Key Evidence and Findings: The appellant's timely payment of duty, interest, and partial penalty was noted. Application of Law to Facts: The Tribunal found the imposition of equal penalty unjustified. Treatment of Competing Arguments: The Tribunal noted the lack of reasoning by the appellate authority in upholding the penalty. Conclusions: The Tribunal set aside the penalties imposed.SIGNIFICANT HOLDINGS The Tribunal emphasized the importance of addressing contentions raised by appellants and criticized the lower authorities for failing to do so, resulting in a miscarriage of justice. The Tribunal reaffirmed that procedural lapses by principal manufacturers should not negate substantive benefits to job workers, as established in prior case law. The Tribunal held that the invocation of the extended period of limitation requires explicit evidence of wilful suppression, which was absent in this case. The Tribunal set aside the impugned orders, allowing the appeal with consequential relief.