Excise manufacture burden: Department must prove who manufactured goods before duty can be fastened on the assessee.
In central excise, manufacture had to be proved by evidence, and the Department bore the burden of showing that the goods were made by the assessee. Filter elements were not shown to have been manufactured by the assessee, as the record did not establish production by the assessee rather than by job workers, and mere non-obtaining of relaxation under Rule 51A did not prove manufacture. Machining of aluminium castings into filter heads was treated as a transformation into distinct machine parts, but liability still could not be fastened on the raw material supplier without proof that the outside processors were only hired labour. The demand was therefore unsustainable on both items.
Issues: (i) Whether the filter elements were manufactured by the assessee so as to attract central excise duty. (ii) Whether the machining of aluminium castings for filter heads changed their character and made the assessee liable to duty.
Issue (i): Whether the filter elements were manufactured by the assessee so as to attract central excise duty.
Analysis: The Department did not produce evidence to show that the filter elements were manufactured by the assessee rather than by the job workers. The burden of proving manufacture by the assessee lay on the Department and was not discharged. Mere non-obtaining of relaxation under Rule 51A of the Central Excise Rules did not establish manufacture by the assessee, particularly when the goods were claimed to have been received from job workers for use in the final product.
Conclusion: The filter elements were not proved to have been manufactured by the assessee, and duty was not chargeable on that basis.
Issue (ii): Whether the machining of aluminium castings for filter heads changed their character and made the assessee liable to duty.
Analysis: The unmachined castings were sent to job workers for machining. Machining by turning, drilling, boring, and similar processes converts castings into machine parts, and castings are distinct articles in trade and tariff from finished parts. The Department also failed to substantiate that the outside processors were only hired labour so as to treat the assessee as the manufacturer. On the settled principle that the person who actually manufactures the goods is the manufacturer, liability could not be fastened on the raw material supplier merely for sending castings for machining.
Conclusion: The machined filter heads could not be treated as manufactured by the assessee for the purpose of duty.
Final Conclusion: The demand was unsustainable, and the assessee was held not liable to central excise duty on either the filter elements or the filter heads.
Ratio Decidendi: In excise, manufacture must be established by evidence, and the burden to prove that goods were manufactured by the assessee lies on the Department; a raw material supplier is not the manufacturer merely because goods are processed by job workers or outside processors.
TaxTMI 
AI Drafter ✕
TaxTMI 
