AI Drafter 
TaxTMI 
TaxTMI 
2026 (1) TMI 261
X X X X Extracts X X X X
X X X X Extracts X X X X
....The facts of the case are that the records of the appellant were scrutinized by Audit, first for the period 2005-06 - from 07.08.2006 to 10.08.2006 and second for the period 2006-07 to 2008-09 - from 12.10.2009 to 16.10.2009. During the course of scrutiny for the period 2005-06, the Department observed that the appellant was carrying out some activities on the goods purchased for trading sale viz., assembly, boring, painting, etc., in order to finish the goods as per specification in purchase order of the customer. The Department considered the process undertaken by the appellant as amounting to 'manufacture' of the goods in the hands of the appellant and demanded Central Excise duty leviable thereon. 2.1. The appellant took the stand that they were dealing in manufacture of HI-TORQUE Resilient Coupling and trading of Gear Coupling, Pin Bush Coupling, Rotoflex Couplings, Spring (Steel) etc. and Expansion Joint (Metallic and Non-metallic). At that time, the appellant agreed to the observation of the Department that finishing the goods to the specification of requirement of the customer by assembly and painting, etc., on trade goods tantamount to 'manufacture'. The appellant found....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onents was simple and did not need any processing so no manufacture was involved; that they were under the bona fide belief that by packing the components or by simply attaching the components through nuts and bolts (Pins) no manufacture was involved within the meaning of Section 2 (f) of the Central Excise Act, 1944 and so they were not required to pay any duty. It has also been submitted that in most cases, they purchased complete Couplings and supplied to their customers as complete Couplings, where the question of payment of duty did not arise. 3.1. In support of their contentions, the appellant relied on the decision of the Hon'ble Supreme Court in the case of Union of India & Others Vs Delhi Cloth & General Mills Co. Ltd. & Others reported in 1977 ELT J 199 (S.C.), wherein the Hon'ble Apex Court has defined that "manufacture" implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation, but something more is necessary, there must be transformation of that and a new and different articles must emerge having a distinctive name, character or use. The appellant contends that as there were no tr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s to exhibit that the coupling purchased was sold as such. They have also supplied the materials in loose condition in as much as the assembly of such components was merely to fix up the nuts and bolts in the holes made by the suppliers. Thus, it is the submission of the appellant before us that such simple assembly by fixing mere nuts and bolts could not be treated to be a process amounting to 'manufacture'. We find that in spite of their stand that the process undertaken by them did not amount to manufacture as defined under Section 2(f) of the Central excise Act, 1944, the appellant paid duty on the goods sold by them at the instance of the Department, in respect of the cases where they assembled mainly pin bush, sleeve, hubs of gear coupling and pin bush coupling. 6.1. Thus, we observe that the issue to be decided in this appeal is whether the activity of assembling the bought out items into a coupling and labelling them, amounts to 'manufacture' or not. We observe that Section 2(f)(iii) of the Central Excise Act, 1944 defines certain process such as labelling /re-labelling amounts to 'manufacture' in respect of the goods listed the Third Schedule The said Section 2 (f) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the said goods manufactured by them. 7. Regarding the issue of limitation raised by the appellant, we observe that the issue was initially raised by audit in the year 2006. For the sake of ready reference, the said issue raised by the audit in paragraph 3 of the Audit Memo and communicated to the appellant vide letter dated 10.08.2006 is reproduced below: - OFFICE OF THE COMMISSIONER OF CENTRAL EXCISE: SELECTIVE AUDIT BRANCH KOLKATA-II COMMISSIONERATE: 44, PARK STREET: KOLKATA-700016. C.No. III(10) 26/SA/CE/Kol-II/Gr.-1/06 Date:- 10/8/2006 To M/s GBM Manufacturing (P) Ltd. 25B, Camac Street, ID Camac Court, Kolkata-700017. Dear Sirs/ Madam, Subject:- Audit Observation no. 1/GBM/EA-2000/06-07. During the course of EA-2000 Audit, pertaining to the period from September, 05 to June, 06, some audit observations are raised which are as follows, Para-1: ..... Para2: ..... Para 3: Non payment of C.E. duty on manufactured finished goods. From the reply furnished by the assessee on 10.08.2006 to the audit query no 2 D....
X X X X Extracts X X X X
X X X X Extracts X X X X
....yre, Gear, Break Drum, Lovejoy Couplings, Spring, Metallic & Non-Metallic Expansion Joints) on which no manufacturing activity was done in our factory premises. In our earlier reply to your Audit Query No. 2/GBM/06-07, our quantification under Heading Goods amounting to Manufacture did not reflect the actual figure, which we have rectified now. ........................... We assure you for payment of C. Excise Duty along with Edu. Cess on regular basis which has been imposed on us after Audit Observation. We hope that we will be able to pay a lump sum amount as early as possible. Thanking you, Yours Truly, For GBM MANUFACTURING PVT. LTD BISHAKHA SHARMA Managing Director 7.2. From the Audit Memo communicated to the appellant and the reply given thereto by the appellant, it is seen that the Department has raised the issue on 10.08.2006, vide the above said audit Memo. The appellant had paid part of the duty as per their own calculation. We observe that the Department has not bothered to raise any demand on the basis of that audit objection raised in the year 2006 till the next audit conducted in 2009. It is al....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts requirement we made finished bare and key way on our trading Gear Coupling with pilot bore in advertently amounting to Rs 75.85,961.48 as assessable value and the remaining clearance as it is from our purchase material amounting to Rs. 1,46,59,482.00 as per Annexure B enclosed and now we agree to pay the Central Excise duty on that goods having assessable value of Rs. 75,85,961.48 which amounts to Rs. 12,13,754.00 as Basic Excise duty and Rs. 24,275.00 as E. cess and Rs. 12,138.00 as S&HE cess and also declared that we have no other purchases similar to those as is narrated in Annexure B. Yours faithfully. [15.10.2009] (P. Mondal) Factory Manager 8.1. From the above, we find that the appellant had agreed to pay the duty by considering the activities undertaken by them as amounting to 'manufacture'. However, at that time, they disputed the quantification of duty and paid only part of the duty demanded. In this regard, we take note of the fact that the Department was well aware of the activities undertaken by the appellant from 2006 itself. We find that the appellant have not suppressed any information from the Department. Accordingly, we hol....