M/s. Tecumseh Products India Ltd. Vs. Commissioner of Central Excise, Hyderabad
EmailAppeal: Civil Appeal No. 1477 of 1998
With C. A. No. 1513 of 1998
(From the Judgment and Order dated 24.11.97 of the Central Excise, Customs and Gold (Control) Appellate Tribunal, South Zonal Bench at Madras in F. O. No. 3003/97 in A. No. E/257/93)
With C. A. No. 1513 of 1998
(From the Judgment and Order dated 24.11.97 of the Central Excise, Customs and Gold (Control) Appellate Tribunal, South Zonal Bench at Madras in F. O. No. 3003/97 in A. No. E/257/93)
Petitioner: M/s. Tecumseh Products India Ltd.
Respondent: Commissioner of Central Excise, Hyderabad
Apeal: Civil Appeal No. 1477 of 1998
With C. A. No. 1513 of 1998
(From the Judgment and Order dated 24.11.97 of the Central Excise, Customs and Gold (Control) Appellate Tribunal, South Zonal Bench at Madras in F. O. No. 3003/97 in A. No. E/257/93)
With C. A. No. 1513 of 1998
(From the Judgment and Order dated 24.11.97 of the Central Excise, Customs and Gold (Control) Appellate Tribunal, South Zonal Bench at Madras in F. O. No. 3003/97 in A. No. E/257/93)
Judges: S. Rajendra Babu, CJI & G. P. Mathur, J.
Date of Judgment: May 05, 2004
Appearances:
Mr. V. Lakshmikumaran, Mr. Alok Yadav, Mr. V. Balachandran, Advocates for the Appellant.
Mr. Raju Ramachandran, Additional Solicitor General, Mr. Sanjiv Sen and Ms. Vibha Datta Makhija, Advocates with him for the Respondent.
Mr. Raju Ramachandran, Additional Solicitor General, Mr. Sanjiv Sen and Ms. Vibha Datta Makhija, Advocates with him for the Respondent.
Head Note:
EXCISE
Central Excise Act, 1944
Section 2(f) – Central excise – What constitutes ‘manufacture’ for the purposes of levy of excise duty – Appellant engaged in repairing defective compressors – One of the parts of the compressors (stators) which could not be repaired sent to job worker for making the stators -Stators received by the job worker subjected to further processing like shaping, varnishing and baking at the premises of the appellant before these are fitted in the compressors – Collector taking the view that the appellant being the ‘manufacturer’ of the stators was liable to pay duty thereon – Adjudicating authority holding the job worker to be the manufacturer of the stators and not the appellants – On further appeal Tribunal holding the appellants to be the manufacturer of the stators. Validity. Held since the appellant was found to be carrying out a full range of processes for bringing into existence the stators, the Tribunal was correct in holding the appellants to be the manufacturers of the stators.
Central Excise Act, 1944
Section 2(f) – Central excise – What constitutes ‘manufacture’ for the purposes of levy of excise duty – Appellant engaged in repairing defective compressors – One of the parts of the compressors (stators) which could not be repaired sent to job worker for making the stators -Stators received by the job worker subjected to further processing like shaping, varnishing and baking at the premises of the appellant before these are fitted in the compressors – Collector taking the view that the appellant being the ‘manufacturer’ of the stators was liable to pay duty thereon – Adjudicating authority holding the job worker to be the manufacturer of the stators and not the appellants – On further appeal Tribunal holding the appellants to be the manufacturer of the stators. Validity. Held since the appellant was found to be carrying out a full range of processes for bringing into existence the stators, the Tribunal was correct in holding the appellants to be the manufacturers of the stators.
Held:
In the present case, what was looked into, examined and found was the several steps taken in respect of the stator and so far as the stators were concerned, it has been rightly held by the tribunal that separate activities were carried on by the appellants which were identical to the ones that was carried out in respect of new stator and, therefore, to the extent of the stator being made ready for the purpose of using in the repairing of compressor must be held to be an activity of manufacture and the tribunal has confirmed the demand only in respect of “Stators”. (Para 6)
Cases Reffered:
1. CCE, New Delhi v. Karna Industries (1992 (42) ECR 522) (Para 4)
2. Shriram Refrigeration Industries Ltd. v. Collector of Central Excise, Hyderabad, (1986 (26) E.L.T. 353) (Para 4)
2. Shriram Refrigeration Industries Ltd. v. Collector of Central Excise, Hyderabad, (1986 (26) E.L.T. 353) (Para 4)
JUDGEMENT:
RAJENDRA BABU, CJI.
1. The question raised for our consideration in these appeals is whether while repairing the defective compressors any part such as stators replaced by the appellant involves manufacturing activity attracting duty under the Central Excise Act. The appellant in the process of repairing scraps some components which cannot be repaired and one such component is stators. The stators were earlier manufactured in the factory of the appellants for repairing of the compressors. Later, the materials required for replacing the scrapped components are received on payment of duty from the factory of the appellant. The service centre sends these materials to outside job workers for making the stators. Thereafter the appellant undertook the shaping, varnishing and baking of such stator to fit such stators into the compressor housing. The Collector having felt that the activity of shaping, varnishing and baking done by the appellant on receipt of the stator from the job workers results in manufacture and initiated proceedings for adjudication of tax.
2. The appellant contended that the job workers are manufacturers of stators and not the appellant as stators are received from the job workers in complete technically functional state. The activities undertaken by the appellants are only to use the stator and not manufacture the stators. The appellants also challenged the invocation of the longer period of limitation, which was available to the appellants only in case of suppression of fraud, coalition or willful statement or contravention of rules to the payment of duty.
3. The adjudicating authority held that the job workers is the manufacturer of the stator and not the appellants and that the extended period of limitation cannot be invoked. On appeal to the appellate tribunal, it was held that the appellants are manufacturers of the stators and not the job workers because they undertook the process of shaping, varnishing and baking and then only the marketable goods came into existence and it also held that the extended period of limitation was invokable. Hence this appeal.
4. Somewhat similar questions had arisen for consideration in Shriram Refrigeration Industries Ltd. v. Collector of Central Excise, Hyderabad1 and in CCE, New Delhi v. Karna Industries2. It appears that the appeal filed against the order made in the Shriram Refrigeration case (supra) to this Court stood dismissed by this Court in civil appeal no.1029 of 1987 and connected matters on merits. In that case the meaning of ‘repairs’ as differentiated from the term ‘manufacturer’ had been examined thoroughly by the tribunal and, therefore, took the view that the repair, recondition or remake in the process of repair employed would not amount to manufacture. Similarly, in the case of ‘Karna’, the tribunal took the view that the defective compressors received if repaired by putting in the necessary parts which had worn out or scrapped then there is no manufacturing activity involved.
5. It is clear that the tribunal, however, in the order under appeal took the view that while the job workers carried out the job work of winding of the stator, but such stator would not be ready for use in the compressor and would be subject to the processes of pressing for shaping by hydraulic press. This would go to show that the stator as such could not have been fitted and used in the compressor for which purpose it has been formed. Further, varnishing was to be done by the appellants and the same was done to provide necessary insulation and it became a finished product only in the hands of the appellants. Therefore, the activity carried on by the appellant was considered to be one of manufacturer because they were carrying out the full range of processes for bringing into existence the ‘stator’ and this range of process carried out by them was exactly the same as the ones which are carried out for the stators which were manufactured out of new stack of laminations.
6. The situation that is considered and examined either in the ‘Shriram Refrigeration’ or ‘Karna Industries’ was entirely different. In the present case, what was looked into, examined and found was the several steps taken in respect of the stator and so far as the stators were concerned, it has been rightly held by the tribunal that separate activities were carried on by the appellants which were identical to the ones that was carried out in respect of new stator and, therefore, to the extent of the stator being made ready for the purpose of using in the repairing of compressor must be held to be an activity of manufacture and the tribunal has confirmed the demand only in respect of “Stators”.
7. But, insofar as the application of extended period of limitation provided under section 11A is concerned, we do not think that the tribunal is justified because it was not clear as to whether if any part is used for the purpose of repairing a machinery would amount to manufacture. In fact, the tribunal on a detailed analysis and after going into several processes carried out by the appellant, came to the conclusion that the stators which were used in the repairing of the compressors involved manufacturing activity. This circumstance itself shows that there was bona fide dispute between the parties in regard to the question whether stators made ready for the purpose of use of compressors involved any manufacturing activity or not. Therefore, to the extent the authorities invoked section 11A of the Act and imposed penal interests and other penalties shall stand set aside and the order made by the tribunal stands modified to that extent.
8. These appeals are partly allowed accordingly.
1. The question raised for our consideration in these appeals is whether while repairing the defective compressors any part such as stators replaced by the appellant involves manufacturing activity attracting duty under the Central Excise Act. The appellant in the process of repairing scraps some components which cannot be repaired and one such component is stators. The stators were earlier manufactured in the factory of the appellants for repairing of the compressors. Later, the materials required for replacing the scrapped components are received on payment of duty from the factory of the appellant. The service centre sends these materials to outside job workers for making the stators. Thereafter the appellant undertook the shaping, varnishing and baking of such stator to fit such stators into the compressor housing. The Collector having felt that the activity of shaping, varnishing and baking done by the appellant on receipt of the stator from the job workers results in manufacture and initiated proceedings for adjudication of tax.
2. The appellant contended that the job workers are manufacturers of stators and not the appellant as stators are received from the job workers in complete technically functional state. The activities undertaken by the appellants are only to use the stator and not manufacture the stators. The appellants also challenged the invocation of the longer period of limitation, which was available to the appellants only in case of suppression of fraud, coalition or willful statement or contravention of rules to the payment of duty.
3. The adjudicating authority held that the job workers is the manufacturer of the stator and not the appellants and that the extended period of limitation cannot be invoked. On appeal to the appellate tribunal, it was held that the appellants are manufacturers of the stators and not the job workers because they undertook the process of shaping, varnishing and baking and then only the marketable goods came into existence and it also held that the extended period of limitation was invokable. Hence this appeal.
4. Somewhat similar questions had arisen for consideration in Shriram Refrigeration Industries Ltd. v. Collector of Central Excise, Hyderabad1 and in CCE, New Delhi v. Karna Industries2. It appears that the appeal filed against the order made in the Shriram Refrigeration case (supra) to this Court stood dismissed by this Court in civil appeal no.1029 of 1987 and connected matters on merits. In that case the meaning of ‘repairs’ as differentiated from the term ‘manufacturer’ had been examined thoroughly by the tribunal and, therefore, took the view that the repair, recondition or remake in the process of repair employed would not amount to manufacture. Similarly, in the case of ‘Karna’, the tribunal took the view that the defective compressors received if repaired by putting in the necessary parts which had worn out or scrapped then there is no manufacturing activity involved.
5. It is clear that the tribunal, however, in the order under appeal took the view that while the job workers carried out the job work of winding of the stator, but such stator would not be ready for use in the compressor and would be subject to the processes of pressing for shaping by hydraulic press. This would go to show that the stator as such could not have been fitted and used in the compressor for which purpose it has been formed. Further, varnishing was to be done by the appellants and the same was done to provide necessary insulation and it became a finished product only in the hands of the appellants. Therefore, the activity carried on by the appellant was considered to be one of manufacturer because they were carrying out the full range of processes for bringing into existence the ‘stator’ and this range of process carried out by them was exactly the same as the ones which are carried out for the stators which were manufactured out of new stack of laminations.
6. The situation that is considered and examined either in the ‘Shriram Refrigeration’ or ‘Karna Industries’ was entirely different. In the present case, what was looked into, examined and found was the several steps taken in respect of the stator and so far as the stators were concerned, it has been rightly held by the tribunal that separate activities were carried on by the appellants which were identical to the ones that was carried out in respect of new stator and, therefore, to the extent of the stator being made ready for the purpose of using in the repairing of compressor must be held to be an activity of manufacture and the tribunal has confirmed the demand only in respect of “Stators”.
7. But, insofar as the application of extended period of limitation provided under section 11A is concerned, we do not think that the tribunal is justified because it was not clear as to whether if any part is used for the purpose of repairing a machinery would amount to manufacture. In fact, the tribunal on a detailed analysis and after going into several processes carried out by the appellant, came to the conclusion that the stators which were used in the repairing of the compressors involved manufacturing activity. This circumstance itself shows that there was bona fide dispute between the parties in regard to the question whether stators made ready for the purpose of use of compressors involved any manufacturing activity or not. Therefore, to the extent the authorities invoked section 11A of the Act and imposed penal interests and other penalties shall stand set aside and the order made by the tribunal stands modified to that extent.
8. These appeals are partly allowed accordingly.
