Custom, Excise & Service Tax Tribunal
M/S. Electropneumatics & Hydraulics ... vs Commissioner Of Central Excise, Mumbai ... on 17 May, 2016
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
Appeal No.
E/2646/05
- Mum
(Arising out Order-in-Appeal No. BR/92/M-IV/2005 dated 22.06.2005 passed by the Commissioner of Central Excise (Appeals), Mumbai)
For approval and signature:
Honble Shri M.V. Ravindran, Member (Judicial)
Honble Shri Devender Singh, Member (Technical)
1. Whether Press Reporters may be allowed to see No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the No CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy Yes
of the Order?
4. Whether Order is to be circulated to the Departmental Yes
authorities?
M/s. Electropneumatics & Hydraulics (I) P. Ltd.
Appellant
Vs.
Commissioner of Central Excise, Mumbai IV
Respondent
Appearance:
Shri R.D. Wagley, Advocate for the appellant Shri N.N. Prabhudesai, Supdt. (AR) for the respondent CORAM:
Honble Shri M.V. Ravindran, Member (Judicial) Honble Shri Devender Singh, Member (Technical) Date of hearing : 17-05-2016 Date of decision : 17-05-2016 O R D E R No: ..
Per: M.V. Ravindran This appeal is directed against Order-in-Appeal No. BR/92/M-IV/2005 dated 22.06.2005.
2. The bare facts after filtering unnecessary details are, appellant herein is a manufacturer of Pneumatic Cylinders & valves and discharged appropriate Central Excise duty. During the EA 2000 audit of the assessee, it was observed that during the period June 1999 to March 2004, appellant had cleared Seal kits for Pneumatic Cylinders & valves without Central Excise duty. This was brought to the notice of the appellant by the audit party, in response to which the appellant contended that the said Seal kits were combination of ORing & U Cap seals etc. which were bought out items and not manufactured and these were given as replacement in the Pneumatic Cylinders & valves supplied by them to the customers. The appellant also contended that this Seal kits were supplied to their customers in the form they had received and no excise duty is liable to be paid as there is no manufacture. Show-cause notice was issued demanding duty with interest and also proposed to impose penalties. The matter was adjudicated by the Adjudicating Authority after following the due process of law. The Adjudicating Authority confirmed the demands raised with interest and also imposed penalties. On an appeal, the First Appellate Authority did not agree with the contentions raised by the appellant and held that the items cleared by the appellant were termed as Seal kits which was a manufacturing activity inasmuch as that the appellant had put in a plastic cover various types of ORing & U Cap seals which can be used for Pneumatic Cylinders & valves and the said Seal kits consists of fixed number of particular seals and hence the entire process would amount to manufacture and then only these products become marketable. Coming to such a conclusion, he rejected the appeal filed by the appellant.
3. Ld. Counsel appearing on behalf of the appellant after drawing our attention to the various aspects of the case submits that Seal kits which are cleared by the appellant are integral parts of Pneumatic Cylinders & valves and the value of the said kits are included in the discharge of the Central Excise duty when Pneumatic Cylinders & valves are cleared. It is his submission that this activity of putting together the spares in one packet does not amount to manufacture as these ORing & U Cap seals are already manufactured products in the hands of the manufacturer who has supplied the same to appellant. He would draw our attention to the various bills and challans raised by the supplier who is the manufacturer after showing us the specimen sample of Seal kits. He would submit that the packeting or putting together pre-determined quantity of ORing & U Cap seals would not amount to manufacture even by extending definition of the term manufacture under Section 2(f) of Central Excise Act, 1944. He would then submit that no process of manufacture is involved in packaging of the rubber seals in plastic bag. He would rely upon the following citations:-
1) XI Telecom Ltd. 1999 (105) ELT 263 (AP)
2) Dalmia Industries Ltd. 1999 (112) ELT 305 (T) maintained by Supreme Court 2005 (184) ELT A37 (SC)
3) TI Diamond Chain Ltd. 2000 (126) ELT 790 maintained by Supreme Court 2001 (130) ELT A259 (SC)
4) CCE vs. Venelec Electromech Indus (P) Ltd. 2002 (141) ELT 156 (T)
5) Electronics Corporation of India Ltd. 2004 (167) ELT 420 (T)
6) Goetze (India) Ltd. 2004 (169) ELT 274
7) CCE vs. Geeta Engg. Works Ltd. 2011 (267) ELT 373
8) Kapoor Lamp Shade Co. 2015 (319) ELT 170 (T)
9) CCE vs. Neycer India Ltd. 2015 (320) ELT 28 (SC) 3.1. It is also his submission that the Order-in-Appeal is travelling beyond the allegation in the show-cause notice inasmuch as the Order-in-Appeal states that process of packing of ORing & U Cap seals is a process incidental to the manufacturing process while show-cause notice and Order-in-Original states that the demand is on the Seal kits as component/spares of machine. The issue of manufacturing process was only the subject in the show-cause notice and hence could not have been held so by the First Appellate Authority.
4. Ld. Departmental Representative, on the other hand, would submit that the ORing & U Cap seals which are packed together in a pre-determined quantity is nothing but amounting to manufacturing. He would submit that by packeting this pre-determined quantity of ORing & U Cap seals are required for the Pneumatic Cylinders & valves sold by them and this Seal kits are used by the appellants customers in replacement of the same in the Pneumatic Cylinders & valves purchased. He would submit that the Adjudicating Authority as well as the First Appellate Authority has specifically recorded that the Seal kits were words given by the appellant for packeting of the ORing & U Cap seals, hence the said packet of Seal kits is a product which became manufactured items. He would rely upon the Tribunals decision in Sriram Pistons & Rings Ltd. 2004 (164) ELT 289 for the proposition that supply of piston ring sets in accordance with the specification would amount to manufacture. He would rely upon the judgment of the Supreme Court in the case of Empire Industries Ltd. vs. UOI 1985 (20) ELT 179 for the proposition that transformation of an object into a different commercial commodity is sufficient to constitute manufacture under Section 2(f) of the Central Excise and Salt Act. He would then submit that the case in hand, packeting of different ORing & U Cap seals will amount to manufacture as per the ratio of the Apex court in the judgment. He also submits that these ORing & U Cap seals are specially made to order by the supplier and these ORing & U Cap seals cannot be utilised in any other machinery except Pneumatic Cylinders & valves manufactured by the appellant.
5. Having heard both sides and after giving due consideration to the submissions made by both sides, we find that the issue involved in this case is whether packeting of pre-determined quantity of various ORing & U Cap seals in plastic bags would amount to manufacture or otherwise.
6. It is undisputed that the ORing & U Cap seals which are packed by the appellant are sold by them to the customers as Seal kits. It is also undisputed that these quantities of ORing & U Cap seals are fitted into a Pneumatic Cylinders & valves which are manufactured by the appellant and cleared on payment of appropriate duty. It is also undisputed that these ORing & U Cap seals are manufactured by the manufacturer who avail benefit of SSI exemption.
6.1. The definition of manufacture as per Section 2(f) of Central Excise Act, 1944 for the period in question reads as under:-
Section 2(f) manufacture includes any process, -
(i)?incidental or ancillary to the completion of a manufactured product;
(ii)?which is specified in relation to any goods in the Section or Chapter notes of [the First Schedule] to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to [manufacture; or [(iii) which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer, and the word manufacturer shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account 6.2. The finding of both lower authorities that the packeting of various ORing & U Cap seals and selling them into the market as Seal kits would amount to manufacture is misconceived by the department. A pictorial representation is reproduced as to the dispute in question.
It can be seen from the picture that ORing & U Cap seals are only packeted in plastic bags, this packeting remains undisputed.
6.3. On perusal of various documents like delivery challan and invoice raised by the appellant for the sale of this Seal kits we find that the said invoice, as raised by the supplier, clearly indicates that the ORing & U Cap seals are manufactured and cleared while the invoice raised by the appellant indicate the same as Seal kits which indicate that there are miscellaneous bought out spare items and were constituted items for particular valve. The question of considering this packeting as manufacture does not arise as the ORing & U Cap seals were already marketable when the supplier/manufacturer had manufactured the same and cleared to appellant. Subsequent packeting of pre-determined quantity of these in a plastic bag has not made the products further marketable. In the absence of any note to the chapter that packeting of pre-determined quantity would amount to manufacture, this activity in our view cannot be considered as a manufacturing activity. We find that more or less similar issue came up before the Tribunal in Dalmia Industries Ltd. (supra) and Tribunal held in favour of the assessee therein. The said view of the Tribunal was upheld by the apex court in 2005 (184) ELT A37 (SC). Similar view was expressed by the apex court in CCE vs. Neycer India Ltd. (supra).
7. In our considered view, ORing & U Cap seals which were purchased by the appellant from various manufacturers and packeting the same as spares would not amount to manufacture by any stretch of imagination.
8. Since we have disposed of the appeal on its merits, we are not recording any finding on various other submissions made by both sides.
9. In view of the foregoing, in the facts and circumstances of this case we hold that the impugned order is unsustainable and liable to be set aside and we do so.
10. The impugned order is set aside and the appeal is allowed.
(Operative part pronounced in Court) (Devender Singh) Member (Technical) (M.V. Ravindran) Member (Judicial) //SR 11 E/2646/05