1984 (4) TMI 287 - AT - Central Excise

Summary

Issues:
- Interpretation of the term "manufacture" under Central Excises and Salt Act, 1944 for the purpose of excise duty liability on re-shelling of Roller Shafts.
- Determination of whether re-shelling of roller shafts constitutes a new article being manufactured under Section 2(f) of the Act.
- Comparison of the process of re-shelling with established legal precedents on manufacturing processes.

Detailed Analysis:

The case involved a show cause notice issued by the Government of India under Section 26(2) of the Central Excises and Salt Act, 1944, seeking to set aside an order of the Appellate Collector regarding the duty liability on re-shelling of Roller Shafts under Item 68 of the Central Excise Tariff. The respondents contested the duty liability, arguing that re-shelling does not result in the manufacture of a new article. The Assistant Collector initially held that excise duty was leviable on re-shelling under a specific notification, but the Appellate Collector set aside this decision, stating that no new article with a distinct name and character was manufactured, hence no duty liability arose.

In response to the notice, the respondents explained that the roller shafts received for re-shelling were used in Sugar Factories and underwent re-conditioning to improve performance. They argued that the process did not amount to "manufacture" as the roller shafts remained the same before and after treatment, with no new article emerging. They relied on legal precedents, including Supreme Court decisions, to support their position that mere changes or repairs do not constitute manufacturing unless a new and distinct article is created.

The arguments presented by both parties referenced various legal cases and interpretations of the term "manufacture." The respondents cited cases where processes similar to re-shelling were held not to amount to manufacturing, such as re-treading of tires and re-conditioning of internal combustion engines. The Department, on the other hand, referred to cases where re-making of spinnerettes and metal containers was not considered manufacturing. Additionally, an exemption under Notification No. 118/75 for goods used in the factory of production was highlighted.

After considering the facts, legal arguments, and precedents cited, the Tribunal agreed with the respondents' contentions. They confirmed the order of the Appellate Collector, ruling that the re-shelling of roller shafts by the respondents did not constitute manufacturing for the purpose of excise duty liability under Tariff Item 68. Consequently, the show cause notice was discharged, and the appeal was rejected.