2026 (2) TMI 1335 - AT - Central Excise

Manufacture - transformation into a commercially marketable product qualifies as manufacture, enabling exemption notifications to apply.

Processes that transform inputs into a different, commercially usable and marketable product constitute 'manufacture' for excise purposes; accordingly the ... Manufacture of Lead Ingots from battery scrap and Lead scrap - job work - benefit of exemption under Notification No. 214/86-CE - in relation to manufacture - consistency of departmental treatment Manufacture - The purification and processing activity undertaken by M/s GM amounts to manufacture. - HELD THAT: - The Tribunal's earlier final decision in the Respondent's own case [2017 (10) TMI 1181 - CESTAT CHANDIGARH] has held that the purification of unrefined lead to refined lead and subsequent manufacture of lead alloy results in a distinct, commercially usable product and therefore amounts to manufacture. The Tribunal's reasoning-applying the tests in Servo Med and categorising processes where a different, marketable product emerges as manufacture-was followed by the Commissioner (Appeals) and accepted by this Bench. The earlier Tribunal order has neither been reversed nor stayed and has attained finality; accordingly the activity is to be treated as manufacture for the disputed period. [Paras 6, 9] The activity undertaken by M/s GM is manufacture. Exemption under Notification No. 214/86-CE - in relation to manufacture - The Respondent is entitled to the benefit of Notification No. 214/86-CE because the goods manufactured by the job worker are used in relation to the manufacture of final products. - HELD THAT: - The Commissioner (Appeals) relied on the Tribunal's earlier findings that the refined lead ingots are distinct, meet commercial and specification standards and are used in battery manufacture. Even if the principal's activity were viewed otherwise, the expression 'in relation to' must be given an expansive interpretation (per Doypack Systems [1988 (2) TMI 61 - SUPREME COURT]), covering activities integrally connected with or incidental to manufacture. On these bases the Respondent qualifies for the exemption under Notification No. 214/86-CE. [Paras 6, 8] Benefit of Notification No. 214/86-CE is available to the Respondent. Consistency of departmental treatment - The department cannot adopt inconsistent positions by treating identical activities as manufacture at one unit and denying the same characterization at another to deprive an assessee of exemption. - HELD THAT: - Following the principle applied by the Tribunal in Dabur India Ltd.[2015 (10) TMI 1839 - CESTAT NEW DELHI], inconsistent departmental treatment of identical products or processes across units is legally unsustainable. The Tribunal noted that treating the same process as manufacture at some units while denying it at another, solely to deny exemption, lacks foundation. This bench affirmed that the department cannot discriminate between assessees manufacturing identical goods at different locations. [Paras 7] Inconsistent departmental treatment is impermissible and cannot be used to deny exemption. Final Conclusion: The impugned order of the Commissioner (Appeals) upholding entitlement to exemption and dropping the demand is upheld; the Revenue's appeal is dismissed and the cross-objection disposed of accordingly. Issues: (i) Whether the processes undertaken by the principal unit amount to 'manufacture' for the purposes of levy under Section 3 of the Central Excise Act, 1944; (ii) Whether the assessee/job-worker is entitled to benefit of Notification No. 214/86-CE dated 25.03.1986 (and alternatively Notification No. 56/2002-CE) for the disputed period; (iii) Whether the demand (and consequential penalties) confirmed in the Order-in-Original can be sustained.Issue (i): Whether the processes undertaken by the principal unit amount to 'manufacture' under Section 3 of the Central Excise Act, 1944.Analysis: The Tribunal applied the established tests distinguishing processes that leave goods the same or transform them into a different, marketable product. Reference was made to the earlier Final Order of the Tribunal holding that purification to refined lead and subsequent alloying produces a commercially usable product with distinct character and specifications (including standards of purity), and that identical processes elsewhere were recognised as manufacture. The Tribunal also relied on precedent principles that an activity resulting in a different product that is marketable amounts to manufacture.Conclusion: The processes amount to manufacture. The conclusion is in favour of the assessee.Issue (ii): Whether the assessee/job-worker is entitled to benefit of Notification No. 214/86-CE dated 25.03.1986 (and alternatively Notification No. 56/2002-CE).Analysis: The Tribunal treated the earlier Final Order in the assessee's own case as binding and final for the period under consideration and held that the goods produced qualify as being used 'in relation to manufacture' of final products; the phrase was given an expansive interpretation consistent with precedent. The Tribunal further held that the department cannot take inconsistent positions between units producing identical goods and therefore cannot deny the exemption to the present assessee where similar processes were treated as manufacture elsewhere.Conclusion: The assessee is entitled to benefit of Notification No. 214/86-CE dated 25.03.1986; alternatively, if that benefit were denied, entitlement to Notification No. 56/2002-CE would be available. The conclusion is in favour of the assessee.Issue (iii): Whether the demand and consequential penalties confirmed in the Order-in-Original can be sustained.Analysis: The Commissioner (Appeals) relied on the Tribunal's earlier final order and dropped the demand; the present Tribunal found no infirmity in that approach and noted that the earlier Tribunal order has neither been reversed nor stayed. Given the legal characterisation favourable to the assessee, imposition of penalty for the legal issue was not warranted.Conclusion: The demand and consequential penalties cannot be sustained. The conclusion is in favour of the assessee.Final Conclusion: The impugned Order-in-Appeal which allowed the assessee and set aside the Order-in-Original is upheld; the Revenue appeal is dismissed, and the assessee's entitlement to the exemption is confirmed.Ratio Decidendi: Where a process transforms input into a different, commercially usable and marketable product with distinct character and use, that process constitutes 'manufacture' for purposes of excise duty and entitles the party to applicable exemption notifications when statutory conditions are met.