By TIOL News Service

MUMBAI, SEPT 01, 2014: THE appellant is engaged in the activity of dilution of sulphuric acid and the finished product is supplied to the battery companies for use in the batteries. The contention of the appellant is that the said activity is not a manufacturing activity as they only mixed two chemicals.

However, the department was of the view that the activity amounts to manufactureas per Section 2(f)(ii) of the Central Excise Act, 1944 read with Chapter note 9 of the Chapter 28 of CETA, 1985 and accordingly a demand was issued and confirmed by the CCE, Pune-III.

The appellant is before the CESTAT.

After hearing both sides, the Bench adverted to the definition of manufacture contained in section 2(f) of the CEA, 1944 and observed -

++ The activity undertaken by the applicant is that they are purchasing 98% concentrated sulphuric acid, and as per the requirement of the customers they diluted it with de-mineralised water, to attain desired concentration.

++ The product that emerged was diluted sulphuric acid (28-50%), which was marketable and it is specifically used in the manufacture by battery manufacturing units. Therefore, in terms of definition under Section 2(f) of the Central Excise Act, 1944, we hold that the appellant are engaged in the activity of manufacture.

++ Accordingly, they are required to get Central Excise registration and to clear the goods on payment of duty. As the appellant were of the view that the activity does not amount to manufacture, therefore, neither did they take registration nor did they avail CENVAT Credit on the inputs.

++ Therefore, in the interest of justice, we hold that as the activity of the appellant amounts to manufacture, they are entitled to take CENVAT Credit on inputs procured during the impugned period.

++ We further find that as the appellant has not recovered any amount over and above the amounts shown in the invoice as the sale price of the finished goods, therefore, same may be treated as cum-duty price. In these terms, we hold that the appellants are liable to pay differential duty along with interest and also imposed a penalty of Rs.5000/- under Rule 27 of Central Excise Rules.

++ As the issue involved is interpretation whether they are involved in manufacturing activity or not, therefore, penalty under Section11AC of the Act is not warranted.

The appeal was disposed of in above terms.

In passing: Also see 2013-TIOL-818-CESTAT-MUM & 2013-TIOL-762-CESTAT-MUM.

(See 2014-TIOL-1640-CESTAT-MUM)