I C Engines cleared with bought-out pumps in a single carton as 'Pump Set' - Process does not amount to manufacture - Exemption for IC Engines used in such pump sets is not admissible - HC remands matter
By TIOL News Service
ALLAHABAD, NOV 19, 2015: THIS is a revenue appeal directed against the order of the Tribunal reported in 2006-TIOL-1630-CESTAT-DEL. The respondent assessee is manufacturer of I C Engines which are used captively for manufacture of PD Pumps. As per Notification No 6/2002 CE, all goods used for manufacture of PD Pumps are exempted. The assessee availed the benefit of exemption for the IC Engines captively used. In addition, the assessee had also cleared IC Engines along with pumps bought from Mahindra Engineering Works by classifying them together as Pump sets. The assessee paid duty on these Pump sets. However, department denied the exemption of IC Engines used in such packages on the ground that putting the engine and pump together in a pack does not amount to manufacture. The Tribunal allowed the appeal by the assessee and now the revenue is before the High Court.
As against two final orders of the Tribunal, only one appeal was filed by the department, the High Court proceeded to decide issues as arising only from one Final order.
The High Court also held that the preliminary objection by the assessee on maintainability of the appeal under Section 35G is not sustainable as the issue involved is to decide whether the activity undertaken would amount to manufacture.
After hearing both sides, the High Court held:
+ The Tribunal has completely ignored the findings of fact based on relevant material recorded by the Adjudicating Authority. The Tribunal also completely ignored the fact that the respondent assessee is manufacturing and clearing I.C. Engine being used for vibrator, concrete mixer, pumping, power generation etc. and have been clearing I.C. Engines, as such, for sale in the open market on payment of duty and also clearing for the captive consumption without payment of duty for use in the manufacture of Honda make P.D. pump of certain variants where both the pump and prime mover i.e. I.C. Engine have been developed and manufactured by assessee themselves. The dispute was with regard to payment of duty on such I.C. Engines which were merely put in a carton along with bought out Pump manufactured by M/s. MEW. The packing of bought out Mahindra pump with the I.C. Engine manufactured by the respondent assessee contained two buyers' manual, one pertain to their own I.C. Engine and other pertain to Mahindra Pumps purchased from M/s. MEW. These manuals separately provided the description and the functioning of I.C. Engine. The Mahindra Pump manufactured by M/s. MEW has been retained separately even on the printed sheet to be pasted on the packing box which bear the description "G.K. 200" with Mahindra WMK 2520 water pump". These facts clearly indicate that the I.C. Engines were not used by assessee within the factory of production for the manufacture of the P.D. Pump sets in question.
+ The finding recorded by the Tribunal in the impugned order that by putting together a Pump and Engine and a platform the assessee had produced a new item viz. "P.D. Pump" is wholly baseless and also without consideration to the findings of fact based on relevant material and evidences recorded by the Adjudicating Authority. Merely putting together one bought out item with own manufactured item in a carton does not involve any process amounting to manufacture under Section 2(f) of the Act.
+ The impugned order of the Tribunal cannot be sustained and, consequently, deserve to be set aside and the case deserve to be remitted back to the Tribunal for de novo consideration of the facts of the case, the findings recorded by the Adjudicating Authority in the order in original and the evidences referred therein after which a reasoned decision shall be rendered by the Tribunal.
(See 2015-TIOL-2633-HC-ALL-CX)
