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Appellate Tribunal rules conveyor assembly not manufacturing under Section 2(f) - duty overturned The Appellate Tribunal CEGAT, Mumbai ruled that the conveyor system assembled by the appellant did not amount to manufacture under Section 2(f) of the Act ...
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Appellate Tribunal rules conveyor assembly not manufacturing under Section 2(f) - duty overturned
The Appellate Tribunal CEGAT, Mumbai ruled that the conveyor system assembled by the appellant did not amount to manufacture under Section 2(f) of the Act and was not subject to duty. The Tribunal found that the system became immovable property once assembled and that the process of dismantling it did not constitute manufacturing. Consequently, the Tribunal allowed the appeal, overturned the duty demand, and provided for any necessary relief as per the law.
Issues: 1. Whether the conveyor system fabricated by the appellant amounts to manufacture within the meaning of Section 2(f) of the Act and is liable to duty.
Analysis: The main issue in this appeal before the Appellate Tribunal CEGAT, Mumbai was whether the conveyor system assembled by the appellant at a factory should be considered as manufacture under Section 2(f) of the Act and be subject to duty. The Commissioner had previously determined that the conveyor system constituted manufacture and upheld the duty demand.
The appellant argued that they did not manufacture the components but merely assembled them into a conveyor system. They highlighted that each component was supplied by different manufacturers and brought together at the assembly site. Referring to Supreme Court judgments and circulars, the appellant contended that the assembly, fabrication, and erection of the system did not amount to manufacturing excisable goods. They emphasized that when the system became a conveyor system, it transformed into immovable property.
The department, on the other hand, relied on the Commissioner's order, claiming that the conveyor system was fixed to the ground for vibration-free operation. The appellant, in response to the show cause notice, submitted an affidavit detailing the components, the assembly process, and the purpose of the conveyor system. The affidavit explained the step-by-step erection of the system and how it was used for handling parts within the factory.
The Tribunal analyzed the facts in light of the Supreme Court's judgment in a similar case and the circulars issued by the Board. It concluded that the conveyor system acquired its identity only after the necessary operations to make it functional were completed. The system could not be transported as a complete unit and had to be disassembled into parts. Therefore, the Tribunal held that the conveyor system constituted immovable property, and the process of dismantling did not amount to manufacturing.
Ultimately, the Tribunal allowed the appeal, set aside the impugned order, and left room for any consequential relief as permitted by law.
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