The Hyderabad bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) ruled that the process of cutting jumbo rolls and slitting does not fall under the definition of manufacturing as per Section 2(f) of the Central Excise Tariff Act.
The appellant is registered with the Central Excise department and is engaged in the business of buying tubes ( stainless steel pipes ), which are mainly used for exploration of oil and gas. After buying, the appellant undertakes certain processes thereon, such as, upsetting, heat treatment, inspection, testing, threading and external coating, so that the pipes can be used for the purposes of oil drilling.
The appellant was also manufacturing couplings and these couplings are affixed to the purchased pipes. The couplings are necessary for connecting tubes with one another. The appellant was paying duty of Excise on the value of couplings. The appellant is also undertaking the said activity on job work basis for M/s ISMT, which sends the bare pipes to the appellant for carrying out the aforementioned processing, after which the pipes are returned to the principal, duly fitted with the couplings. The appellant claims labour charges for this job work activity. The contention of Revenue is that this processing of tubes by undertaking the aforementioned processes amounts to ‘manufacture’ and therefore, the appellant should have discharged Excise duty on these goods.
The bench found that this issue is no longer res integra. Under similar facts and circumstances,the Supreme Court in CCE vs. SR Tissues Pvt Ltd ( supra ), on the issue of whether the process of unwinding, cutting and slitting to sizes of jumbo rolls of tissue paper would amount to manufacture on the first principles or under Section 2(f) Central Excise Tariff Act, it was held that the activity of slitting and cutting of jumbo rolls of plain tissue paper/aluminum foil into smaller size does not amount to manufacture as character and end-use did not undergo any change on account of winding, cutting/slitting and packing.
It was also held that slitting and cutting of toilet tissue paper or aluminum foil has not been treated as manufactured by legislature under Section/Chapter notes of Central Excise Tariff, hence Sec 2(f) of the Act is not applicable. It was also held that mere mention of a product in a tariff heading does not necessarily implies that the said product was obtained by process of manufacture, just because raw material and finished product fall under two different sub-headings. It cannot be presumed that the process of obtaining finished product from such raw material automatically constitutes manufacture.
Further found that the SCN was bad as extended period of limitation is not available to Revenue under the admitted fact that all the facts were in the knowledge of the Revenue, as is evident from the earlier SCNs issued either for demand of Excise duty or for demand of service tax. Admittedly, the appellant had maintained proper books of accounts and records and had been regularly filing their statutory returns. Even from the list of relied upon documents, these facts are evident as relied upon documents are nothing but the documents maintained by the appellant in the ordinary course of business.
The two member bench of the tribunal comprising Anil Choudhary ( Judicial member ) and A.K Jyotishi ( Technical member ) set aside the impugned orders and allowed the appeals. The Appellant shall be entitled to consequential benefits, in accordance with law.
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